Payday lender Wonga is entering the business loans market, offering up to £10,000 after an application process taking just 15 minutes.
Small businesses will be able to apply for loans of between £3,000 and £10,000 on terms ranging from one to 52 weeks.
The loans – which must be repaid weekly – include an application fee and variable rate interest and start at around 0.3 per cent a week.
Figures from the Bank of England reveal that overall business lending is falling by more than three per cent each year.
Wonga said recent research shows that 55 per cent of small businesses applying for an overdraft for the first time last year were rejected and 43 per cent of first time loan applications were also declined.
Errol Damelin, the company’s founder, said: “Small business lending is broken and we intend to use our platform to offer a real alternative.”
But some argue that Wonga's entrance into the small business loans market is a sign of how desperate thiongs have become.
Christopher Shaw, CEO of alternative finance specialists, Platform Black, commented: "Taking on sky high APRs in order to meet immediate cash flow requirements is about the worst thing you can do as a business.
"With loans like this, there's a high probability that short-term pain will result in long-term pain.
"Wonga say it's inappropriate to look at the APR, as the loans are often taken out for as little as a week — and yet the longest term is 52 weeks.
"The UK's SMEs need fuel to restart the economy, but not at these prices."
Wonga said its short term lending service was aimed at firms with urgent cashflow problems rather than those requiring long term finance.
The lender’s business service will initially be aimed at limited liability companies and limited liability partnerships running for at least three years, with monthly sales of more than £20,000.
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