Payday loan firm Wonga to lend to small businesses LONDON (Reuters) - British online payday loans provider Wonga.com launched a credit service for small businesses on Monday, aiming to fill a gap in the market left by banks who have been hamstrung by tight lending conditions imposed since the credit crunch. Wonga, which has made 4 million short-term loans to consumers since its launch in 2007, will offer small businesses loans of 3,000 to 10,000 pounds ($4,800 to $16,200) for periods of between one and 52 weeks. Interest rates will be fixed at between 0.3 and 2 percent per week, depending on how risky the loan is judged to be. Wonga uses automated risk-processing technology to give near-instant answers to online applicants, and turns down about two-thirds of applications. It now aims to export its more popular features, including the simple application screen featuring sliders that can be dragged to the desired amount to be borrowed and repayment period, to the business world. "We wanted it to have all the characteristics that people positively associate with Wonga in terms of transparency, simplicity, ease of use, speed ... and we wanted to bring that to small business," said Chief Executive Errol Damelin. Wonga's business has boomed during the downturn as cash-strapped consumers who found it hard to obtain short-term credit elsewhere turned to it for loans of up to 1,000 pounds to tide them over for up to a month. The company has been criticized for charging too much interest - it charges simple interest to consumers of just under 1 percent per day - and for targeting the vulnerable. But Wonga says its transparency, strict acceptance criteria and low default rates, which are in the mid-single digits, show it is a responsible lender. Because it does not take deposits, Wonga operates under a consumer-credit license, not a banking license, meaning it is not subject to the capital requirements that are currently preventing banks from lending more. "What became crystal clear to us a year or so ago was that small businesses had maybe even more need than individuals for solving short-term cash-flow problems," Damelin, who is also one of the company's two founders, told Reuters in an interview. For owner-operated businesses, capital is their oxygen. That's what they live and breathe and that's what's gives them the opportunity to stay in business and grow their businesses and employ people and help the economy recover. Unlike the consumer-loan application process, which instantly displays the total cost of borrowing, Wonga for Business will have no instant decisions or predetermined interest rates because of the larger sums at stake and variety of risk factors. Applicants must provide information about their company and its directors, who personally guarantee the loan. Wonga says the application process can be completed in 12 minutes, and money can be transferred to the business in as little as half an hour. Wonga is the market leader for short-term, unsecured loans that can only be obtained online. It currently operates in Britain but is considering entering other markets such as Canada and South Africa in time. Wonga's backers include Accel Partners, Balderton Capital, Greylock Partners, Oak Investment Partners and the Wellcome Trust. The company raised 73 million pounds in fresh capital a year ago. Reporting by Georgina Prodhan; Editing by Hans-Juergen Peters