Is it time to start investing your company's surplus cash?

A study by the Institute of Chartered Accountants in England and Wales (ICAEW) in 2017 revealed that, at a time when many people’s thoughts might have been on tightening their belts, two-thirds of UK businesses had a cash surplus. And, not only that, but, since then, the level of deposits and cash reserves held by British companies has even risen! Cash deposits grew by 8% in 2018, and have increased by a whopping 51% in the last 5 years.

It’s of course important that businesses have contingency funds in place for the unexpected. However, with reports showing that Brexit uncertainty has been dampening capital expenditure by company directors, we believe a lot of this extra cash has come from funds previously earmarked for investment in the business.

It seems a shame that such a large chunk of business capital is left to languish on the balance sheet, earning next to nothing in return. A problem a lot of companies that we speak to face is a lack of investment opportunities that meet their risk profile and need for flexibility. Understandably, not all companies would be comfortable putting their business assets at the mercy of the stock market, or tying their money up for years on end.

Here at Growth Street, we’re passionate about supporting great British businesses, and providing them with the tools they need to grow. While we’re perhaps best known for supporting companies that need a flexible, overdraft style working capital facility, we work with many cash-rich businesses, too, helping them understand how they can invest surplus cash on their balance sheet.

How can Growth Street help?

With Growth Street, your business can earn an extra source of income by investing in loans to other like-minded British businesses, focused on growth. So far, more than 170 business owners have chosen to do so.

Here’s how it works:

  • Earn up to 5.3% a year*
  • Get access to your funds within 30 days (in normal market conditions)
  • Your investment is protected by our Loan Loss Provision – so far, no investor has lost any interest or capital (although past performance is not a guarantee of future results).
  • There are no fees associated with investing

Our Loan Loss Provision is designed to protect our investors. However, bear in mind that it does not give you a right to a payment so you may not receive a pay-out even if you suffer loss. The fund has absolute discretion as to the amount that may be paid, including making no payment at all. Therefore, investors should not rely on possible pay-outs from the Loan Loss Provision when considering whether or how much to invest.

How are companies currently investing with Growth Street?

Your business can start investing from as little as £10, however, on average, our company investors deposit over £50,000 with Growth Street. They come from a range of industries and regions. The way they use our investor product varies, too.

For example, one IT consultancy has been investing with Growth Street since the beginning of 2017, and has earned over £11,500 of interest in the process. They’ve made use of their flexible investor account by adding money and taking it out as their cash position changes over time: the company has made more than 30 deposits and 15 withdrawals. The following chart shows their investment balance over time:

We also have another company investor in the market research sector, who focus on online gaming. They joined Growth Street as an investor in late 2016, and their balance has increased steadily from £10,000 to £260,000. For the past year, the company has been withdrawing monthly interest as a source of an extra income, and so far have earned more than £23,000 in interest.

If this sounds interesting, why not sign up as an investor, too? You can also learn more on our investment website or call our investor team at 0800 123 1231.

Are you a broker or introducer? We recently launched a new company investor referral scheme!

Know some businesses that might be interested in investing with Growth Street? Refer businesses to Growth Street as investors, and you could earn a commission equal to 10% of the interest paid out to companies in the first two years from when you refer them to us. If you are interested to become an investor introducer, fill out this quick form and a member of our investor team will get back to you.

*assumes that all principal and interest earned is reinvested for a year and that you are matched to borrowers throughout that time. Of course, you should remember that by investing in peer-to-peer lending, your capital will be put at risk and there is no FSCS protection.

Written on in Business Insights Investing
Chief Executive Officer