2018 - A transformational year of growth

The past year has been transformational for Growth Street. As we have continued to improve our proposition to borrowers and our tools for risk management, we’ve seen an acceleration of our growth and a 16.7% improvement in the Effective Rate* available to investors when comparing 2017 to 2018 (year to date).

Have you been waiting for an opportunity to increase your investment on the platform? If so, the time could be now. For those reading this post before 14 December 2018, we have launched a new deposit bonus offer to further boost your returns over the coming year.

What has changed?

Last year I said that I wanted the time it takes investors’ funds to be matched with borrowing businesses to remain under 24 hours in 2018. I’m delighted to say that with a month to go, we have delivered so far: average time to match this year to date has been 22.75 hours*. As we approach the end of the year, we’ve seen matching times fall further - in November to date, the time to match has been under 7 hours. It takes longer to fly from London to New York!

The result of this reduction in time to match has been higher and more consistent returns for investors, even accounting for cash drag. Unlike many other peer-to-peer platforms, we always communicate the ‘after cash drag’ returns to investors on our matching page. (Of course, this is also after bad debt protection from our Loan Loss Provision, although that protection is not guaranteed.)

Here’s the change in the Effective Rate** available since October 2016 when we started offering our investment product to retail clients:

As you can see, Effective Rate averaged 5.0% p.a.** through 2018 to date, which is 16.7% higher than the average Effective Rate through 2017 of 4.3% p.a.** Although past performance is not a guarantee of future results, we believe that the reduction in volatility of the available Effective Rate, makes future returns more predictable***.

How have we done it?

We are on course to grow the amount of outstanding loans on the platform by over 140% this year versus the end of 2017. In 2017, the equivalent growth versus 2016 was 100%. We’ve made three major adjustments to our borrower origination strategy which has led to this accelerated borrowing growth.

Firstly, we’re now targeting larger businesses. In 2017, the average application we received was for £130k, but in 2018 to date it has been £310k. As we’ve refined our marketing approaches, we’ve specifically targeted larger businesses: we’ve seen that even relatively large SMEs find it difficult to get the support they need from the banks. This has helped improve the volume and stability of our investors’ lending.

Secondly, we’ve continued to invest in our own technology systems to improve the productivity of our sales and credit teams. One of the reasons we can attract great businesses is the speed and certainty we can give can them when applying for loans. We’ve focused on automating key parts of the sales and credit decision-making process, while making sure that our experienced underwriters still play an active role in the final credit decision. Automation and process improvements have helped us significantly reduce the “lead to live” sales and credit cycle, allowing faster growth.

Finally, we’ve invested in great people. All our business development managers have worked in banks or large independent SME lenders prior to joining Growth Street. Since June 2018, our commercial team has been led by Julie Ashmore. Julie is a veteran of SME finance, having been UK Operations Director at Bibby Financial Services and Head of SME Lending at HSBC. In addition, we’ve expanded our credit team, including recruiting our Risk Director Mark Williams in December 2017. Mark started his career at HSBC in 1984, and has worked in a range of credit and workout roles - across the full range of macroeconomic conditions - through his career.

Through this combination of technology and people, we believe we can offer growing British businesses a market-leading funding proposition.

What’s next?

In December I’ll be sharing a second post to update you on the new developments we have planned for 2019, and how we plan to navigate some of the key events facing the UK next year.

In the meantime, find out more about our winter bonus campaign, and dive deeper into our investing statistics on the site. Thanks for reading!


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* The average time to match lend orders in hours has been the following since launch of the marketplace on 14 October 2016:

** The Effective Rate is calculated as (Market Rate) multiplied by (Deployment Rate). This shows the average amount investors would earn over a year, taking account of the time funds are not matched to borrowers, and assuming all principal and interest is reinvested over that period. (Past performance is not an indicator of future performance.)

*** For those interested in the statistics, the standard deviation of returns reduced from 0.4% (2017) to 0.2% (2018 year to 25 November).

(Your capital is at risk if you lend to businesses. Lending is not covered by the Financial Services Compensation Scheme.)

Written on in Investing
Chief Executive Officer