London-based online credit outfit Wonga has completed a £73 million funding round led by US venture capitalist Oak Investment Partners.
The firm, which claims to have handled more than a million short-term loans in three years of trading, has courted controversy over its repayment terms, which are calculated at a massive APR of 2698%.
Wonga has sought to deflect criticism by pointing out that the facility is intended solely as a short-term cash advance up to a maximum of 31 days, with interest charged at one per cent a day. The company claims its credit checking technology rejects up to two-thirds of applicants and that its core market is comprised of young professionals who find access to short-term unsecured debt an attractive alternative to bank loans and credit card spending.
Errol Damelin, Wonga founder and CEO, says: "We're growing a new market and attracting people away from bank overdrafts and credit cards. Our investors understand our vision and can see we're doing things in a very different way; disrupting a huge, traditional market with internet technology and data."
He says the latest equity financing will be used to fund the firm's lending and invest in the company's back end credit scoring technology. Other participants in the round included new investor Meritech Capital Partners, alongside existing backers Accel Partners, Balderton Capital, Dawn Capital, Greylock Partners and TAG.