Payday lender Wonga has reportedly raised £10m in a new round of funding to help it fund compensation claims.
The new equity was supplied by Accel Partners and Balderton Capital, among other unnamed backers, according to a report by Sky News which cites sources close to Wonga. The capital has been raised at a pre-money valuation of £23m.
This capital has been raised to support the company from collapsing, the article states.
According to Sky News’ sources Wonga CEO Tara Kneafsey informed the directors earlier in the year that the number of complaints around loans has increased since its rules changed in 2014. This led to a higher number of compensation payouts which would have risked the company becoming insolvent if no money was raised to support it.
Cash pressure is said to be so extreme that Wonga is reportedly looking to sell some of its assets and raising more debt.
Last year, the company sold its German e-commerce company BillPay to Swedish e-commerce company Klarna, for an undisclosed amount. BillPay is an online payment processor which enables consumers to pay for products over a fixed period.
Wonga is an international payday lender, offering consumers short-term loans from £50 to £600. There are three loan schemes available, with each having a different repayment period, with a maximum term of six months. Each loan comes with a daily interest rate of 0.8 per cent.
The lender has been attempting to turn-around the business which has reported losses for both 2015 and 2016 financial years. The reports for 2017 are yet to be released.
In 2015, the company reported a loss of over £80m, which was more than double than its 2014 results. This increase in losses was due to a £15.4m compensation payout it was forced to pay to 45,000 customers, following an intervention from the FCA which stated poor lending practices. Last year the company reported a loss of £65m.
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