Growth Street Review
** Growth Street review updated April 18th, 2018 **
In April 2017, I 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 March 2018 Allocation: Unchanged
My current rate of return: 5.5% (Pre-tax return after bad debts and fees)
|Est. Annual Returns:||Up to 5.7%
|Recent Return Rate Trend:||⬇|
|My Risk Rating *:|
|Loan Security:||Business assets, debentures, personal guarantees|
|Time to Become Invested:||Slow|
|Time Needed Managing:||None|
|Lending Agreements With:||Borrowers|
|Cashback Offer:||£200 cashback bonus on £5,000 after one year of investing|
|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.
How Do I Open An Account?
Sign up here for a no obligation Growth Street account.
New Investors earn a £200 bonus on a £5,000+ investment. (Terms & Conditions below):
- This offer is only open to new investors who sign up for an account on or after 28th March 2018 and have their account fully activated on or before 30th April 2018.
- You can request to withdraw your money at any time, but to qualify for the bonus you must invest a minimum of £5,000 within seven days of your account being activated and maintain that investment amount for one year. This means that the amount of money you have matched PLUS the amount you have on order waiting to be matched must always exceed £5,000 during the one year period.
- If at the end of the one year period you qualify for a bonus payment, we will credit your Growth Street investor account with £200 within two weeks.
(This is a 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 may 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.)
The Growth Street Review – What You Need to Know:
- 30 day maximum lender exit and withdrawal
- Competitive lender interest rates considering a 30 day withdrawal
- 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
- Can take time to become invested / cash drag (lost interest) occurs
- Rates are falling
- Smaller loan book
I really like Growth Street’s unique twist on peer to peer lending. Credit line and invoice lending makes sense for small and medium businesses looking to borrow money when they need it most. Growth Street states they have strict criteria and that borrowers must comply with and ongoing loan monitoring occurs.
Growth Street Review: My experiences so far….
So far, my lending experience has been good but I have been a little disappointed with the quickly falling return rates. Aside of that, loan matching times have speeded up so I’m relatively happy.
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:
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:
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:
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:
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, their customer service rep:
I opted for the Market Rate at 6.4%. (Market Rate has since fallen in the lower 5% range.)
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?
UK Tel: 0808 123 1231
When Did Growth Street Launch?
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.
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 told me their funds took three days to match.)
In January 2018, my lend orders have been matched within 24 hours. (Matching times will always vary based on demand and supply.)
You can view current matching times here.
What’s The Minimum Deposit / Investment?
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?
How Much Annual Interest Does Growth Street Pay Lenders?
Market Rate: 5.3%
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:
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 mean plenty of extra time to spend on the golf course.
How Long Are The Loans?
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 simple lending options. What used to be two products is now being reduced to one:
Market Rate: This is a volume-weighted average rate of the all matched loans for the last 30 days. This will be the only lending product offered.
I was always confused with Growth Street’s two product approach since loans selected at Market Rate were never filled. I’m glad Growth Street changed to a single lending product.
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.
Now Growth Street is simplifying to one lending product, rates should stabilise and remain in the lower 5% range.
Simple To Use
For those looking for a simple peer to peer lending option, Growth Street is a great choice. Only one lending product is being offered so there are no confusing decisions to be made. Auto-invest makes reinvesting easy.
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.
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 a 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 December 2017, the fund holds £665,000.
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 to 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 have 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 happen with most peer to peer companies. This is referred to as “cash drag”. Growth Street’s cash drag has been more closely addressed recently and match times are clearly displayed on their website. There was a time when Market Rate orders where taking several months to match but now I expect this time to stabilise since there will only be one lending product. I predict matching times will continue to be about one to two days.
Rates Are Falling
Growth streets rates are still competitive, especially considering the 30-day access terms. Since switching to a single lender product, Growth Street reports rates should stabilise now. I’m hoping they won’t fall below 5%.
Smaller Loan Book
Growth Street has a smaller loan book but it has increased from £9m in December 2017 to £11m in March 2018. Even though the book is increasing, when compared to the giant companies such as Ratesetter and Zopa it’s still small. Small loan books can be detrimental to a company becoming profitable as the generated fees are smaller.
Investing in Growth Street is simple. Deposit money, set reinvestment instructions, receive monthly interest on the first of each month and do nothing further. Really nothing more to it. I plan on leaving my funds deployed.
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.
Cash drag used to be the biggest negative of Growth Street but this seems to have been addressed. I’m hopeful Growth Street will continue to expand their borrower pool in order to grow their loan book. 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 good starting point. Add the fact that you could access your money after 30 days and time management is low, I believe Growth Street has a bright future.
(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 may 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 Growth Street or 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.**