Despite its nationwide reputation as a leading short-term lender to individuals, online payday loans provider Wonga.com recently launched a business loan facility targeted to small firms, as banks are increasingly tight on their lending criteria.

This comes as no surprise to the SME market as firms continue to struggle to raise funding. Loans ranging from £3,000-£10,000 will be available for terms of between one week and one year. The interest rate, including an application fee, will be fixed at between 0.3% and 2% per week, depending on the risk associated.

Despite the government’s pledge to increase bank lending to SMEs via the Project Merlin, there’s still a niche gap in the commercial funding market. Wonga aims to fill this gap left by banks that have been handicapped by the post-credit crunch lending conditions.

However, because it doesn’t require any up-front deposit, Wonga doesn’t operate under a banking license; hence it’s not dependent on any restrictions that prevent banks from offering additional credit.

Wonga aims to position its short-term loans in the ‘business funding’ circle alongside facilities such as bank overdrafts, bank loans and invoice finance. The loans are targeted to SMEs with incoming cash every week rather than two or three times a year.

Wonga Business Loan Criteria

Wonga’s service will initially be available to:

1. Limited liability companies
2. Limited Liability partnerships
3. 1) or 2) above that has been established for 3 or more years
4. 1) or 2) above that has sales in excess of £20k a month

Due to its tight loan parameters, Wonga currently rejects about 67% of applications. However, Wonga revealed that it’s expected to soften the loan criteria over time. Successful applicants typically get the funds needed within 15 minutes of an application.

Despite critics, Wonga continues to flourish

Wonga has been heavily criticised for lending to (vulnerable) individuals at whopping rates of 4,215% APR. Because the monies borrowed could be available almost immediately, Wonga is circumspect of quoting a typical APR for the loan facility. However, the loans will be at rates starting at 17% APR.

The fact that SMEs are lured into using Wonga’s services is a signal of ‘the government’s failure to get finance to successful SMEs’ reported shadow business secretary, Chuka Umunna.

Figures from the Small Business Finance Monitor show that about 26% of businesses use credit cards to generate working capital to cope with everyday challenges. Founder of the online firm MarketInvoice, Anil Stocker said that turning to Wonga-style expensive loans ‘would be even more irresponsible’.

Moreover, Wonga’s business has boomed over the past years and it is considering entering the Canadian and South African market. It also aims at exporting its more popular features such as featuring slides on the application screen to the business sector.

Wonga’s founder Errol Damelin says that their low default rates and strict acceptance criteria show that Wonga is a responsible lender.

Is your business aware of Invoice Finance?

Research by the Federation of Small Businesses showed that 57% of firms were victims of late payment by customers.(See page 7 of FSB doc) This slows down business growth and prevents businesses from taking advantage of early vendor opportunities and offers.

The sad reality is that many of the firms that could qualify for Wonga’s business loan would be eligible for other forms of commercial funding such as invoice finance. With only over 42,000 invoice finance users, it’s evident that many entrepreneurs are unaware of the benefits invoice finance can bring to their business.

What drives firms to such loans with exorbitant rates? Invoice finance releases funds within 24 hours at much favourable terms. With invoice finance, you no longer have to wait 30-90 days for customers to complete payment and no further debt is incurred.

Should Wonga be moving into small business loans? A recent poll conducted by guardian.co.uk shows that 64% agree to this with the remaining 34% against Wonga’s switch to business loans.

There are lots of good reasons why you should consider training your staff, and yourself.

The benefits of training include:

-       Improved employee morale, because the employer is seen to be investing in its staff.

-       Inspiration for you and your staff to think about new and better ways of working.

-       Improved productivity, both through new skills and through better morale.

Surveys have shown that investment in training peaked in around 2001 and has slowly declined since. In 2011, researchers in Cardiff found that the economic downturn has not led to a dramatic fall in training, but has increased the adoption of e-learning and the use of internal staff as trainers.

Typical subjects covered in staff training

Training or certification for at least some staff is mandatory in certain industries, such as food hygiene in catering. However, most businesses do not require any formal training.

These are the areas where you should consider offering training or updates:

Health and safety. Every year, many small businesses face claims from their staff for work-related injuries. Health and safety training can reduce the risk of something going wrong and may reduce the costs of claims brought against you.

Induction training. It’s easy to forget that a newcomer to your business knows very little about it. Taking the time to show them around, introduce them to key staff and explain how things work can speed up the rate at which they become productive workers. It can also reduce the risks of errors made in ignorance.

Social media training. Even if you don’t use social media in your firm, it’s wise to give staff some training in the potential and pitfalls of this new world of communication, particularly if they are going to mention your firm online. In the same way that staff once needed to be trained in how to use the telephone effectively, they now need some guidance on social media.

Specialist skills for their role. Whatever function they have in your business, there will be training available. Putting them on an external course, where they meet others doing similar roles elsewhere, should do more than give them new skills. They should learn how other firms are tackling the same tasks and should pick up new ideas which improve productivity.

Different methods of training your staff

There are many different approaches to training.

On the job. This is a kind of informal apprenticeship, where skills are transferred from one person to another. While commonly used, it has the disadvantage that poor or inefficient working practices can also be transferred.

External training. You, or your staff, attend a course held away from your premises. This can also be a networking opportunity.

In-house training. This is run at your place of work either by an external trainer or a member of your own staff.

E-learning Web-based training offers lots of advantages. It’s relatively low-cost, it can be fitted in around other commitments and it can often be repeated over and over if required. Some e-learning allows interaction with other participants.

Planning is considered one of the most important aspects of running a business. Every business benefits from a plan, no matter whether you are in charge of a large multinational corporation planning an expansion or a small business working out how to launch an exciting new product.

Project management is made almost impossible to do without an adequate plan. Don’t forget that it is easy to start a project, but without careful planning it can be like embarking on a journey to an unknown destination without a roadmap. Although you may manage to make it to your destination eventually, don’t be surprised if you get really lost on the way!

For small business owners especially, it may be tempting to neglect planning altogether. It is natural to think that just because you are the only person in the company, there will be no need to put pen to paper and devise a proper plan. Planning is a time-consuming process and the time spent planning by a small business is likely to be a time when they are not earning any money. At the end of the day however, the benefits of good planning far outweigh any temporary loss of earnings.

Try to use your business plan to provide a reference point for your project. At various stages during the project you can take a look and see how far you have come. This is a great motivational tool and can help determine if you are drifting too far away from your original vision, then correct your course and start to get back on track once again.

The process of writing a business plan can actually help you to become a more accomplished business owner. You will start to think more analytically than ever about your industry and the role of your business within it. Very quickly you will start to see correlations between different parts of your business, for example how decreasing the cost of a particular process might affect your overall profit margin.

The overall value of a business plan just cannot be overstated. The benefit of putting your ideas and concepts down on paper is almost invaluable. All the researching and compiling data about your competitors and the market might prove to be very useful in the years to come.

Choosing Business Planning Software from WinWeb is a great inexpensive software option. Make it easier for you to understand what makes your business great and also identify any areas that need improving.

A personal recommendation by a friend or colleague is worth so much more than a billboard advert, a TV commercial, a full page splash in a glossy magazine, a tweet or even a money-off voucher.

In an age when we’re being bombarded with information and product promotions, word of mouth marketing is becoming more important. The growth of social media has increased the scope of word of mouth, because it’s allowing people to build relationships with those they have never met in person, and for them to exchange recommendations or suggestions.

What you need for effective word of mouth marketing

Brands such as Apple, Innocent and IKEA understand the value of word of mouth, and that personal recommendations on a large scale don’t happen by accident.

As with all your marketing efforts, you should start with a strategy. In this you will determine:

• Who you want to be talking about your message.
• What messages you want people to hear and share.
• What methods you will use to get your message out and help it to spread.
• How you will track results.

Putting together a strategy does not need to take very long, nor does it need to be a formal document. But you do need to be clear about what you want to achieve and how you will do it.

The key components of successful work of mouth marketing

One of the hallmarks of organisations who use word of mouth marketing effectively is that their most enthusiastic followers behave more like fans. They have an inherent disposition to promote the favourite brand or product, although that doesn’t stop them from offering criticism from time to time.

You need fans for word of mouth to work, but first you need to create them. This in turn means having a strong image for your brand. You can’t be all things to all people. Decide what sector of the market you will focus on, and the image you want to portray, before beginning to create fans.

If you want to know what your fans will look like, consider your most enthusiastic customers. They already have a reasonable degree of loyalty to your business or products, so the next step is to foster that. Make their buying experience even more pleasurable, encourage them to come back more often with discounts. Provide them with more reasons to recommend you to others.

Give word of mouth marketing time to succeed

This approach to marketing takes time to build momentum and results. It’s for businesses who want to have a strong customer following in a few years’ time, based on offering great service and value today.

Word of mouth marketing is not just for retail businesses – it can also work well in any B2B environments. Many business buyers seek advice and recommendations from friends and contacts in other firms, and you want them to be promoting you, wherever appropriate.

You know that you’re several steps closer to a sale when someone walks in and says ‘I was recommended to come here’. That’s the power of word of mouth marketing – the prospective customer is already more inclined to buy from you, because others they trust already do.

This is a guest post from Invoice discounting

One of the biggest challenges facing small businesses is how to grow. Making the leap from a one or two person operation to a firm with a dozen staff can feel like an insurmountable challenge.

The key ingredients are the usual suspects – passion, planning, cash flow and hard work. But knowing that doesn’t make it any easier.

Here are some tips from successful entrepreneurs to inspire you forward on that journey to successful growth.

Learn to let go of every decision. Richard Branson, founder of Virgin:

“Day-to-day management has never been my forte, and my early decision to step back from operations gave me the freedom to focus on our main challenges and opportunities. This meant that I had to learn to trust the management teams, and to support them when they saw an opportunity.”

Richard Branson: http://www.entrepreneur.com/article/222739

Maintain your confidence. Dan Sullivan, the founder and president of Strategic Coach, on confidence:

“As an entrepreneur, your number one responsibility is to protect your confidence. Review your achievements on a daily or weekly basis, and use them as a source of new insights. Identify your strengths and passions, and those of your team members, to establish ‘capability goals’. Think, what would it look like if I could develop this capability 10 times, or create 10 times more value?”

Dan Sullivan: http://www.businesszone.co.uk/topic/finances/why-10x-growth-easier-2x-growth/40933?ref=ukbf

Know what your goals are, and how that shapes the character of your business. Anita Roddick, founder of the Body Shop:

“We made a list of all the things we didn’t want to be. We did not want to be these captains of industry. That didn’t make our blood sing. I didn’t want to be a cosmetic diva wearing high heels and make-up, prancing around at the celebrity functions. We were rooted in family and community.”

Anita Roddick: http://www.evancarmichael.com/Famous-Entrepreneurs/883/Anita-Roddick-Quotes.html

Don’t keep putting off important actions. Paul Aitken, founder of Borro.com:

“I spent too much time planning and not enough time doing. I learned that, if you’ve got a good idea, you should back your judgement and go for it.”

Paul Aitken: http://www.growingbusiness.co.uk/my-biggest-business-regret.html

Include ambitious people in your business. Karen Brady, football entrepreneur and part of The Apprentice team:

“Ambition tends to be something that people are afraid of but we can all tell those ambitious people. It’s those people that walk into a room and have that light behind their eyes; without ambition nobody ever started anything. It’s true that without a lot of hard work you don’t finish it, but ambition is that pride, that spark, that thing that drives you constantly.”

Karen Brady: http://www.newbusiness.co.uk/articles/entrepreneurs/karren-brady-‘my-business-advice’