Growth Street Review – My Lending Experiences + New Account Opening

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growth street review

Growth Street Review

** Growth Street review updated July 31st 2017 **

Two months ago, I finally decided to take a serious look at Growth Street and after further research and pondering, I sent some of my £’s into Growth Street’s nurturing arms. Growth Street offers attractive returns by way of facilitating peer to peer credit lines and invoice financing to small and medium sized businesses. Lenders’ are able to access and withdrawal their money within a maximum 30 day period (under normal market conditions). Read on for my unbiased Growth Street review.

My July 2017 Allocation: Unchanged
My current rate of return: 6.2% (Net return after bad debt and fees but before tax)
Est. Annual Returns:Up to 6.3%
My Risk Rating *:
Launched:July 2014
Early Exit:
Autoinvest:
ISA Available:
X
Loan Security:Business assets, debentures, personal guarantees
Provision Fund:
Lender Fees:None
Min Investment:£10
Time to Become Invested:Slow
Time Needed Managing:
None
Lending Agreements With:Borrowers
FCA Regulation:Interim
Cashback Offer:
None
Sign Up:Sign Up For An Account

* This opinion risk rating factors in types of loans offered, interest rates, platform history, default numbers and my own investing experience. My risk rating explained.

The Growth Street Review – What You Need to Know:

Pros
  • 30 day maximum lender exit and withdrawal
  • Competitive lender interest rates considering a 30 day withdrawal
  • Simple to use / fast matching using Priority Rate / easy auto-invest for hand-off investing
  • Automatic lender diversification
  • Provision fund
  • Borrowers subject to rigorous checks
  • Borrowers use credit line and invoice financing versus loans
  • Loans are continually monitored stress tested through online cloud accounting access
  • Only three defaults since 2014 launch
  • Extremely transparent plus great staff communication and support
Cons
  • Market Rate takes time to match / cash drag (lost interest) occurs
  • Rates probably unsustainable / will likely fall
  • Smaller loan book

I really like Growth Street’s unique twist on peer to peer lending. Credit line and invoice lending makes so much sense for small and medium businesses. Growth Street states they have strict criteria that borrowers must comply with as ongoing loan monitoring.

Equivalent Competitors

Ratesetter, Zopa, Lending Works, Landbay

Growth Street Review: My experiences so far….

So far, my lending experience has been 100% hassle free.

Here is the new account opening process from application to investment:

Day 1: Making the decision and applying for an account.

The account application process was a little lengthier than other companies, but I like the added security so no problem:

Growth Street Review

From there, FCA regulatory rules took effect and I was asked to fill out a questionnaire dependent of my investor classification; high net worth, sophisticated or Vauxhall Nova (aka lowest or restricted). I couldn’t decide what type of investor I was that day so I selected the Vauxhall Nova or “restricted” option. (Secretly I wanted to take the fun regulatory questionnaire that restricted investors have to take.)

The questions were funny, ranging from, “Does investing through Growth Street have risk or no risk?” to “Does investing through Growth Street guarantee return of your capital or not?” Or something like that.

After proudly scoring a low B on my third questionnaire attempt (obviously joking here), I was sent an email asking me to activate my email address, and then I was taken to a document upload page for identity verification:

Growth Street Review

I uploaded my passport and then waited. Next, Growth Street sent me another email stating that since I wasn’t a high net worth or sophisticated investor, I had to click a link declaring I wouldn’t invest more than 10% of my net assets in Growth Street. I was planning on investing 11% but I’ll be good and comply.

Day 2: Verification and approval

Once Growth Street verified I wasn’t an Italian mob money launderer, (respect to my Italian readers), I received a nice “welcome aboard” email and was invited to log into my dashboard. Once logged in, I was asked to verify my bank account. The verification link took me to a page where I was asked to click a button to be texted a code. I clicked and immediately received the code on my secret bat-phone via text message, and then I inputted the code into the website, and that was it…account verified! Phew

(Sometime during day one and two, I was sent an email asking for my mobile number as I had inputted it incorrectly during the application process. I didn’t see the email immediately so this delayed my account opening probably by one day; not Growth Street’s fault.)

Then I was taken to the very pretty dashboard:

Growth Street Review

The dashboard is very clean and easy to navigate but alas, one thing was missing.

You know that feeling when you have the knife, fork, sauce (HP) but you don’t have the “stake” (it’s a quote from one of my favourite films, Rounders). I need funds so I clicked the deposit button and was taken to a page explaining the process. Deposits are made via electronic bank deposit and Faster Payments received between 9.30am – 5.30pm are advertised to be credited the same day, except Sundays. BACS payments can take up to three business days.

I logged onto Mr. Barclay’s website and shed a tear as a few of my quids flew the coup, hopefully to be returned to me in the future.

Day 3: Deposit Successful – Lending Time

The money deposit notification email arrived at 8.54am on day three. Not knowing how to lend, I started pressing buttons:

Growth Street

Next popped up a very simple page asking me to choose how much money I wanted to lend, which product and a friendly message from Freddy providing a link to the latest matching time stats:

 

Growth Street

I opted for the Market Rate at 6.4%.

Order placed: 12.50pm
Order matched: 4.00pm (ish)

And that’s how you create a Growth Street account.

What Is A Growth Street?

Growth Street is a U.K. based peer to peer lending company that offers credit lines and invoice financing to small and medium sized businesses.

How Can I Contact Growth Street?

Email: contact@growthstreet.co.uk
UK Tel: 0808 123 1231

When Did Growth Street Launch?

July 2014

Are They Regulated?

Yes, by the UK Government’s Financial Conduct Authority under full permissions. FCA regulation is nothing like the FSCS (Financial Services Compensation Scheme), which covers consumers when they deposit money in banks. The FCA does have the ability to pursue criminal action against companies that violate its standards, but the FCA is not a government entity and it’s funded by the very companies it regulates.

How Do I Open An Account?

Sign up here for a no obligation Growth Street account. (This is referral link which doesn’t cost you anything. My Growth Street review is unbiased and based on my own experiences lending my own money. Growth Street does not compensate me to write this review however they pay me a referral fee for providing them with quality investors. When you support me by opening an account through this link, it enables me to continue to operate this website and provide new in-depth company reviews.)

Who Can Open An Account?

Any person of any nationality can open an account however you must have a UK bank account and UK mobile phone number. You will need a UK cell number in order to complete the security checks.

What’s The Signup Process Like?

See the entire process above.

How Much Time Will It Take To Become Invested?

When I first lent at the Market Rate, I was able to become fully invested in about four hours.

(A family member who signed up after I did told me their funds took three days to match.)

My second deposit was a different story. Here is my current status:

Money deposited: June 8th 2017
Money unmatched as of June 24th 2017 so I cancelled and changed to Priority Rate

15 days in and my Market Rate orders went unmatched. This tells me that most lenders’ have selected Priority Rate which is only 0.1% lower.

Matching times will always vary based on demand and supply.

What’s The Minimum Deposit / Investment?

£10

How Are Deposits Made?

Via bank transfer which usually takes one business day for Faster Payments or up to three business days for BACS payments.

Does Growth Street Offer An Innovative Finance ISA?

Not yet

How Much Annual Interest Does Growth Street Pay Lenders?

Market Rate: 6.3%
Priority Rate: 6.2%

Is Interest Accrued Immediately Or When the Loan Starts?

Interest accrues when your money is matched to borrowers.

When Is Interest Paid?

At various times of the month after borrowers make payments.

Am I Lending To Growth Street Or To The Borrower?

All loan contracts are between lenders’ and borrowers’. You can see every individual loan and its contract inside your dashboard:

growth street review

growth street review

What Are The Fees?

Currently Growth Street doesn’t charge any lender fees.

How Much Time Is Needed Managing My Account and Investments?

None. Auto-investment and reinvestment means plenty of extra time to spend on the golf course.

How Long Are The Loans?

30 days

Is There A Secondary Market To Buy, Sell And Exit Loans?

No secondary market but loans are only for 30 days so a secondary market isn’t really needed.

What Security Does Growth Street Loan Against?

All loans are secured with a first ranking charge over the assets of the business (debentures) or against individual invoice receivables. In some cases personal guarantees are also given but I think personal guarantees hold very little security value.

While I usually don’t see much value in debentures and assets being used as loan security, since Growth Street uses short term lending with strict borrowing criteria, I’m willing to overlook this point.

What Are The Loan Default Rates?

Growth Street’s default rates have been ridiculously low at only four since launch. Even more surprisingly, Growth Street reports a 99.99% recovery rate on those defaults. Default rates can change so please check the current rates here.

What Happens If Growth Street Ceases Operations?

Company failure is the single biggest risk to peer to peer lenders’. As required by FCA regulation, Growth Street has a fully funded run off plan. Contracts between borrowers and lenders remain binding, and the Loan Loss Provision Fund would continue to operate as this is held by a separate legal entity to Growth Street Limited (named Growth Street Provision Limited). Investors’ money would always remain entirely separate to Growth Street’s money throughout the run-off process.

What Are the Different Accounts and Investment Options Growth Street Offers?

Growth Street’s simplicity shines through by only offering two products:

Market Rate: This is a volume weighted average rate of the all matched loans for the last 30 days.

Priority Rate: This rate is 0.1% lower than the Market Rate and is designed for faster lender deployment.

To be honest I don’t understand why the rates would differ so insignificantly but there must a method to Growth Street’s madness. Stay tuned as I find out more.

WHAT I LIKE ABOUT GROWTH STREET:

30 Days Maximum Lender Exit

Lenders’ only loan money for 30 days so providing the borrower repays and normal market conditions exist, theoretically your money is only tied up for 30 days. This is an incredibly attractive reason to invest through Growth Street.

Competitive Interest Rates

Considering your money is only locked in for 30 days, Growth Street’s lender interest rates are very competitive. The closest 30 day rate offered by a peer to peer company is almost 2% lower.

I do think Growth Street’s rates will fall as demand increases.

Simple To Use / Fast Matching Using Priority Rate / Easy Auto-Invest For Hands-Off Investing

For those looking for a simple peer to peer lending option, Growth Street is a great choice. Only two products are offered so there’s no confusing decisions to be made although make sure to use the Priority rate for faster matching. Auto-invest makes putting payments to work completely effortless leaving you more time to do fun things.

Automatic Diversification

Growth Street operates like Ratesetter with regards to diversification and losses so there’s no need to worry about diversifying your loans. Every lender bears the same risk and if losses occur, they are paid out of the Provision Fund.

So what happens if the Provision Fund runs out of money? A resolution event would be declared and all loan contracts would be automatically assigned to the Provision Fund. All loan payments would then be collected by the Provision Fund account and be paid out to lenders’ proportionately.

Provision Fund

Growth Street’s Provision Fund is used to pay lenders’ in the rare event that a borrower is unable to repay a loan. This is funded by the borrower but ultimately comes as reduction in lender revenue so either way, lenders’ pay for provision funds. Growth Street have also stated that their founding investors have contributed £200,000 into the fund and have committed to funding up to £1 million as their loan book grows. That’s impressive!

As of June 2017, the fund holds £335,000 (with an additional expected £220,000 in borrower contributions) while all expected losses total £205,000 so the fund would more than cover all losses.

I love Growth Street’s transparency and how committed they are to protecting lenders’ funds.

Borrowers Subject To Rigorous Checks

Growth Street puts every potential borrower through the investigation torture chamber which is bad news for borrowers but great news for lenders’. Growth Street checks public and private company records, accounts and data to uncover any underlying or potential issues. After all the data is collected, a company director is interviewed and a business credit check is performed.

Finally a Risk Rate is set for each borrower and this rate is collected as a contribution for the Provision Fund. The higher the Risk Rate, the higher the fund contribution.

Loans And Company Account Are Continuously Monitored

Similar to Assetz Capital, Growth Street continuously monitors its borrowers and their company’s performance, however Growth Street takes monitoring to a new level by requiring Growth Street to access their company accounts. These accounts are monitored for performance and borrower account changes are made as necessary. If the borrower’s company is growing and doing well, they can receive extra funding and vice versa if they are under-performing.

Low Defaults and Good Recovery Rates

The stringent borrower criteria and constant monitoring have resulted in extremely low default rates and high recovery rates. The proof of any good peer to peer lending company is in the results and even though it’s a small sample size, Growth Street default and recovery performance has been excellent.

Borrowers Use Credit Lines And Invoice Financing Rather Than Longer Term Loans

If you are considering peer to peer lending, know that the longer a loan is active, the greater the chance of default. Credit lines are usually shorter term loans of up to one year. Shorter loans mean less time to default which is good for lenders.

Extremely Transparent Plus Great Staff Communication

I have found Growth Street to be extremely transparent with their information and numbers. Particularly pleasing has been my communication with staff. All my (sometimes difficult) questions were answered promptly and honestly.

WHAT I DISLIKE ABOUT GROWTH STREET:
Delays In Money Deployment Means Cash Drag On Interest 

Delays in your money being matched to borrowers happens with most peer to peer companies. This is referred to as “cash drag”. Growth Street’s cash drag has become slightly more of an issue recently but only on the Market Rate product which is only 0.1% higher than the Priority Rate. It doesn’t make sense to even try using the Market rate as this point.

Rates Probably Unsustainable / Will Likely Fall

Growth streets rates are very competitive, especially considering the 30 day access terms. I highly doubt rates will continue to stay at this level and I see them gradually dropping into the low 5% range, especially since lender demand remains high.

Smaller Loan Book

Growth Street has a small loan book (£70m as of June 2017) compared to the giant companies such as Ratesetter and Zopa. Small loan books are detrimental to a company becoming profitable as the generated fees are smaller. On a positive note, the loan book is growing with over £7m matched in May 2017.


My Strategy

Investing in Growth Street is about as simple as it gets. Deposit money, choose Priority Rate, set reinvestment instructions, receive monthly interest on the first of each month and do nothing further. I have now opted for the Priority Rate since for me, my Market Rates remained unmatched after 15 days.

The Growth Street Review Conclusion

As you see from my Growth Street review, it appears there are far more advantages than disadvantages, so much so, I wish I had looked at Growth Street earlier.

If you’re looking for a set-and-forget peer to peer lending company that is low risk for the rates offered, I think Growth Street is a great starting point. Add the fact that loans are for 30 days and the investment requires zero management time, I believe we have a winner.


Sign up here for a no obligation Growth Street account. (This is referral link which doesn’t cost you anything. My Growth Street review is unbiased and based on my own experiences lending my own money. Growth Street does not compensate me to write this review however they pay me a referral fee for providing them with quality investors. When you support me by opening an account through this link, it enables me to continue to operate this website and provide new in-depth company reviews.)

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Disclaimers: I’m not paid to write this Growth Street review, nor am I employed by any of the companies I write about. In most cases I have invested or continue to invest my own money through these companies. The sign up links on this website are referral links. When you sign up for an account through my website, I receive a referral fee directly from the companies, at no cost to you. Your support enables me to continue to operate the Financial Thing website. You can read more about my referral links here.

** This unbiased Growth Street review is for information purposes only and should not be regarded as investment advice. Opinions expressed in this Growth Street review are based on my own personal experiences, investing my own money. Peer to peer lending contains risks so never invest more than you can afford to lose.**