Growth Street Review – My Lending Experiences + New Account Opening

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Growth Street review

Growth Street Review

** Growth Street review updated December 4th, 2019 **

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 to Growth Street. Growth Street offers investors 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).

Growth Street recently announced layoffs and a restructuring of its business model as well as the replacement of CEO Greg Carter.

I recently visited Growth Street’s offices for a sit down with CEO Greg Carter and was impressed by their operations.

Read on for my unbiased Growth Street review.

My November 2019 Investment: Reduced
My current rate of return: 5.1% (Pre-tax return after bad debts and fees)
Est. Annual Returns:Up to 5.3%
Recent Return Rate Trend:← →
My Risk Rating *:
Launched:July 2014
Early Exit:
Autoinvest:
ISA Available:
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:Full
Cashback Offer:
Up to £2,000
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 / Any Bonuses?

Up to £2,000 cashback for new and existing customers. Please read terms and conditions on the signup page. (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:

Pros
  • 30 day maximum lender exit and withdrawal (depending on market conditions)
  • Competitive lender interest rates considering a 30 day possible withdrawal
  • Automatic lender diversification
  • ISA available
  • Provision fund to purchase defaulted loans from investors
  • 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
Cons
  • Investment times can vary / cash drag (lost interest) can occur
  • Recent default of two loans over £1 million each
  • Poor recovery results on previously defaulted loans
  • Two large facility loans defaulted in 2019 which would have depleted Provision Fund hadn’t Growth Street stepped in to cover the loans
  • Provision Fund claims in 2018 and 2019 have been high
  • 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.

Equivalent Competitors

Ratesetter, Zopa, Lending Works, Landbay

Growth Street Review: My experiences so far….

So far, my lending experience has been good. The 30-day access option is nice and aside of the return rates being on the lower side of peer to peer lending, 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:

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 FCA 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, their customer service rep:

 

Growth Street

I opted for the Market Rate at 6.4%. (Market Rate has since fallen in the lower 5% range and the Priority Rate no longer exists).

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

And that’s how you create and invest through Growth Street account.

What Is 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. These businesses are mainly weighted in business services and products and construction.

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 Financial Conduct Authority #739318 under full permissions granted December 22nd, 2016. Investments made through Octopus Choice are not covered under the FSCS (Financial Services Compensation Scheme).

FCA regulation is nothing like the FSCS, which covers consumers when they deposit money in banks. The FCA reports to the UK government and has the ability to pursue criminal action against companies which violate its standards and codes of conduct.

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 in order to complete the security checks.

Does Growth Street Allow Corporate Accounts?

Yes, you can open an account under a Ltd. company. When you sign up look for this tick box:

Growth Street review
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.)

** Update** In November 2019, 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?

£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?

Yes, Growth Street now has an ISA which operates the same as a regular account using the standard Growth Street investment product.

How Much Annual Interest Does Growth Street Pay Lenders?

Market Rate: 5.2%

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 mean 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 lenders can exit with 30 days notice under normal market conditions.

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 Loss Rates?

Growth Street’s loss rates were low from 2014 to 2016 but then experienced a spike in 2017 & 2018. In 2019, £961,000 in claims were made against the Provision Fund. There isn’t any explanation for this increase in losses.

You can see data on the statistics page.

Growth Street recently placed two loans of over £1 million each into default. These defaults were absorbed by Growth Street rather than the provision fund. This isn’t good news considering Growth Street’s loan book isn’t large.

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 wind-down and 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 from Growth Street’s money throughout the run-off process.

Administration can be expensive to this would affect the amount of money that is returned to investors.

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 the most 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. (Assetz Capital and Loanpad also offer a 30 Day Access product).

Extremely Professional Company

In September 2018, I visited the Growth Street offices and was extremely impressed with their operation, stability and professionalism. Ex-CEO Greg Carter has a vision leaning heavily on protecting investors and company growth.

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.

Automatic Diversification

Growth Street operates like Ratesetter with regards to diversification and losses. 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. This could have occurred after Growth Street placed two large loan facilities into default. The provision fund would have not have been able to absorb these losses.

ISA Available

Growth Street now offers an ISA where you take advantage of tax-free peer to peer investing. The investment product held within the ISA is the same as is offered in a regular account.

Provision Fund

Growth Street’s Provision Fund is used to purchase defaulted loans from investors. Between 2017 and 2019, the Provision Fund paid out over £2 million.

The fund is financed by the borrowers’ but ultimately comes as a reduction in lender returns. On their statistics page, Growth Street shows that their founding investors have contributed over £1.54 million into the fund.

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.

I am concerned at how rigorous these checks were after the two previous defaults.

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.

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:
Investment Times Can Vary / Cash Drag Can Occur

Delays in your money being matched to borrowers happen with most peer to peer companies. This is referred to as “cash drag”. Since Growth Street’s product is a 30 day one, cash drag has been an issue in the past but was addressed and now matching times are less than 24 hours which is great. Match times are now clearly displayed on their website.

Two Large Loans Defaulted

In a recent email titled “New FCA Regulations”, there was information about two large facility loans that defaulted. Growth Street stated that the Provision Fund would not have been able to fully cover these loans and in order to maximise recovery efforts, the two loans would be purchased from investors by Growth Street and any losses would be covered by Growth Street. While this was a great outcome for investors, I am concerned by these defaults and wonder how Growth Street will recover these losses.

Poor Recoveries on Defaulted Loans

Since 2017, over £2m in Provision Fund defaulted loan claims have occurred. Of these defaulted loans, only £146,879 has been recovered. From 2014-2016, Growth Street had zero claims on the Provision Fund suggesting some loan issues.

Smaller Loan Book

Growth Street has a smaller loan book but it has increased from £9m in December 2017 to £40m in December 2019. Even though the book is increasing, when compared to the giant companies such as Ratesetter and Zopa, it’s still very small.


My Strategy

Investing in Growth Street is simple. Deposit money, set reinvestment instructions and receive monthly interest paid at various times of the month.

Despite the spike in loss claims on the Provision Fund which I’m keeping a close eye on,  I’ve had good experiences lending through Growth Street so I plan on leaving my funds deployed as long as rates remain favourable.

The Growth Street Review Conclusion

Growth Street’s 30 Day loans offer investors a unique way to gain a decent return without having to tie up money for years. Cash drag used to be the biggest negative of Growth Street but this has been addressed and now money is usually deployed within 24 hours. I’m hopeful Growth Street will continue to expand its borrower pool in order to grow their loan book.

I’mwas concerned to learn of the two defaults totaling over £2 million and I am keeping a watchful eye on Provision Fund claims as the amounts have been high since 2017.

 


Up to £2,000 cashback for new and existing customers. Please read terms and conditions on the signup page. (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).

If you enjoyed my Growth Street review and want to know more about peer to peer lending, click here and receive my complimentary Top 5 Peer to Peer Lending Sites Report.

I love feedback, so if you find any errors or omissions in this Growth Street review or have any improvement suggestions, I invite you to contact me and be a part of contributing to this website.

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.**

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