Growth Street - Secured Working Capital Loans
Summary of Investment Proposition
All investments made on the Growth Street platform are in secured working capital loans to UK businesses (secured against all business assets).
I personally made a £2,000 investment in Growth Street on 25 January 2019. I continue to hold this investment and have been impressed with the platform to date.
The current £200 (10.0%) cashback offer (available via my referral link) on an investment of £2,000 is currently the best on offer across all UK P2P platforms.
Time in business
Summary of Key Features
The key features of the Growth Street investment account are listed below.
|Estimated annual returns||5.3%|
|Loan security||All business assets alongside personal guarantees from directors|
|Innovative Finance ISA||X - Not currently available but recent communications suggest that an IFISA is imminent.|
|Cashback offer||£200 when you invest £2,000 (10.0%)|
Detailed Growth Street Review
Growth Street initially launched in 2014, but only opened its doors to retail investors in 2016. The platform lends funds to UK business in the form of working capital loan facilities, secured against all business assets.
The below review is an unbiased summary of my thoughts on the Growth Street investment proposition. Please note that I may receive a referral bonus if you sign-up after accessing the platform via my referral link, though this has not influenced the contents of this review.
Where does Growth Street invest my money?
All funds invested on the Growth Street platform are utilised for secured working capital loans.
Currently, Growth Street lends to a total of 164 businesses (last checked March 2019).
What investment options does Growth Street offer?
To keep it simple; Growth Street offer a singular investment option. There is one market rate which applies to all investments made on the platform (5.3% at the time of writing in March 2019).
This market rate is the return that you as an investor will receive. The Growth Street platform profits from the difference between the total rate paid by the borrower and the market rate. The rate paid by borrowers can vary; but the return paid to investors is fixed. This is because any fluctuation in interest rate influences the marginal interest received by Growth Street.
How long is my money tied in?
GrowthStreet does not operate a secondary market. However, each individual loan features a 30 day term before it is ‘recycled’ on the Growth Street platform to other investors’. Therefore, provided the platform experiences no issues, your money should be available to withdraw with a short one month delay.
However, should you wish to take advantage of the cashback offer on sign-up; you will need to leave your capital untouched for a period of one year.
How frequently is interest paid on the money I invest?
Interest accrues on a daily basis whilst your money is matched with borrowers – you can see the level of accrued interest in your investment dashboard. Interest is actually paid whenever a borrower makes a repayment.
How good is the website reporting?
I found the Growth Street dashboard straight-forward and easy-to-follow.
When logged into your account; you are greeted with a summary page which states the amount of capital you currently have on loan and the level of current interest accrued/paid to date.
If you click on the ‘active loans’ hyperlink, you are then taken to a page which states your contract start/end date along with the market rate you are earning for investing your funds (currently 5.3%).
Is money invested in Growth Street protected?
Growth Street Exchange Limited is authorised by the FCA (link).
Authorised status does not mean that money invested is covered by the FSCS protection scheme which applies to banks, building societies and credit unions only. However, it does provide some comfort as authorised firms must comply with client asset rules which set out how firms hold and control client money.
Generally, it’s important to remember that investing in P2P lending is riskier than putting your money into a savings account. The two key risks in my view are 1) borrowers do not repay on time and 2) Growth Street itself goes into administration. We discuss both of these scenarios below.
Investments made via the Growth Street platform are not tied to specific investments; rather each investor is exposed to the entire loan portfolio. A loan loss provision is held to cover any loans which fall into arrears. Even in the event of a depleted loan loss provision, Growth Street notes that investors would not be exposed to individual loans as all borrowers capital and interest contributions would be pooled and distributed proportionally to investors.
Is Growth Street financially secure?
On 23 January 2019, Growth Street announced that it had raised £7.5 million in investment; suggesting it is financially healthy for the time being.
What data does Growth Street publicly provide investors?
Growth Street currently provides strong data to potential investors in the following areas:
- # of borrowers
- Working capital facility utilisation
- Total value of loans outstanding vs. available facility.
- Sector exposure
- Historical performance of loan loss provision
We give Growth Street a big thumbs up in this area – this information is easily found on their website and provides a lot of data which can be used to inform investment decisions.
The most important data to pay attention to is the historical performance of the loan loss provision. This is the balance Growth Street would use if a business is unable to repay the loan. In 2017/18 there were some substantial claims relating to loans which Growth Street notes would no longer pass their pre-lending checks. At the time of writing; the cash balance of the loan loss provision is £991,369 (March 2019). This represents 4.0% of total loans outstanding.
How easy is the sign-up process?
My experience was that it was very easy. As you would expect, the typical anti-money laundering checks are required, but once passed, your account can be open in minutes.
How can I pay money into my Growth Street account?
Transfers into your Growth Street account can currently only be made via bank transfer. Usually, my personal preference is to pay into my P2P accounts with my debit card in order to save time setting up a new payee in online banking. However, I found the Growth Street transfer process to be rather seamless with my deposit being received almost instantly, presumably due to the UK banking Faster Payments Service.
Growth Street claim that all deposits are cleared by the next working day at the latest.
Do Growth Street offer an IFISA?
The platform currently does not offer the ability to invest through an IFISA. However, an email communication sent to customers in February 2019 suggested that the company is considering introducing an IFISA.
How good is the feedback online for Growth Street?
Growth Street has strong feedback online with a TrustScore of 9.0/10 on TrustPilot based on 191 reviews (last checked March 2019).
What cashback does Growth Street offer its new investors?
Growth Streets’ current cashback rates offered are as follows:
- £200 cashback for investments of over £2,000.
Cashback is paid within 2 weeks following your 1 year anniversary provided your funds have been left untouched over that period. I personally made my first investment of £2,000 in Growth Street on 25 January 2019. I would therefore expect to receive my cashback by 8 February 2020 at the latest.
If you do decide to invest and you have found this review helpful; please do consider signing up via my referral link. This will enable me to continue paying for the running costs of this website.
My review is largely based on my own personal investing experience and interpretation of Growth Street terms. As always, please do your own due diligence before committing investment funds and consider whether investing in this platform is suitable for you based on your own individual financial circumstances.