Wonga in talks with banks to boost SME loans arm The company, which hit the headlines due to its annualised interest rate of as much as 4,214pc, has spoken to several banks about the possibility of leading and underwriting a debt issue for several hundred million pounds. While in their early stages, the conversations signal the firm's first foray into the debt markets. Until now its growth has been funded purely by equity from its founders and private equity houses. The Sunday Telegraph understands that Wonga has discussed the prospect of raising debt either through retail bonds in the UK or through high-yield debt issued in the US. It is thought any debt issuance is not likely until the middle half of 2013. Any money raised would be used to provide significant firepower to the small and medium enterprise (SME) loans business. The company launched Wonga for Business in May. It offers short-term cash loans to SMEs at an annual interest rate of 26pc, and is designed to fill the funding gap created by high street banks" unwillingness to lend. The average loan is seven months, with capital and interest repaid in instalments. Investors in Wonga are thought to have expressed a preference that the company issue debt in the short-term rather than issue any additional equity which might dilute existing shareholders. An initial public offering is still thought likely, but not until 2014-15 due to the state of the public markets and the need for it to prove it can grow beyond its UK consumer lending business. As well as its SME loans business, the extra capital could be used to increase the amount and duration of its personal loans. Wonga has begun testing its consumer platform in South Africa and Canada. It is believed to be looking at Australia as its next most likely outpost.