What to know about investing through Growth Street


Before you continue, please make sure you understand the nature and key risks of investing with Growth Street. Read the following information carefully and if you have any questions, give us a call on 0808 123 1231 (there’s no charge for doing so) between 9am and 6pm on any working day. If you’re unsure about whether this product is right for you, we recommend you speak with a financial adviser.

Remember, your capital is at risk when you invest through Growth Street. Peer-to-peer lending is not protected by the Financial Services Compensation Scheme.

How does it work?

Before being matched on the platform, all investors and borrowers that you lend to enter into a contract with Growth Street, allowing us to act on both your behalves to enter into and manage loan agreements. Investing is done anonymously, so both you and the borrower won’t know who you’re matched to. Our borrowers are offered a line of credit designed to work a lot like a traditional overdraft, allowing them to draw down and repay within a set limit as often as they like (we call this a 'GrowthLine'). Each time a borrower draws down funds using their GrowthLine, we automatically match them to one or more investors on the platform. A new loan contract is then generated and funded directly by each matched investor. A copy of the standard loan contract can be found here.

Growth Street Platform Exchange
Who do we lend to and how do we assess them?

All loans on our platform are made to small and medium sized businesses in the UK. We act on behalf of our investors, by assessing and managing the credit risk of all individual borrowers and the portfolio as a whole.

Our credit team strives to develop robust credit assessment processes that are simple, standardised and scalable. These take objective, frequently updated pieces of data and process them according to a rule-based framework to deliver clear decisions. In addition to making initial underwriting faster and more consistent, our data-driven approach allows us to proactively manage the portfolio by repeating that decision process throughout the term of a borrower’s facility. We are continuously seeking out new, improved and updated sources of data to incorporate into our decision-making. Some of the data sources we use include:

  • Online identity and fraud databases
  • Open Banking connections
  • Links to the borrower’s cloud accounting software
  • CATO data on bank account turnover
  • Personal and business credit searches
  • Online adverse media checks

Of course, human judgement plays an important part in the decision-making process, too. We have a team of experienced credit professionals that review each and every application before a borrower can be approved. This adds value not available through objective data, such as assessing specialist assets and detecting fraud. We also visit, every customer borrowing over £250k in person. In addition, we take security for every facility in the form of a debenture over the company’s assets and, for some facilities, we also take personal guarantees from directors and/or shareholders.

On becoming a borrower with Growth Street, our credit team allocates them a Risk Category between 1 (lowest risk) - 10 (highest risk), taking into account their probability of default and loss given default. A borrower’s Risk Category and Risk Rate are regularly reviewed throughout the life of their facility. You can learn more about our Risk Categories and see up-to-date information about our borrowers (including expected and actual default rates) on our statistics page.

Rates and fees

Investing through Growth Street is completely free. We make our money by charging our borrowers. There are two monthly fees they pay:

  1. Interest’ - This is the rate charged for borrowing funds. It accrues daily, is paid monthly and ranges from 0.5% - 1.6% per month. The rate is made up of three elements: (a) the Lender Rate, which is paid to investors - i.e. the Market Rate; (b) the Risk Rate, which is determined by the borrower’s Risk Category and is paid into the Loan Loss Provision (LLP); and (c) a platform fee payable to Growth Street.
  2. Service Fee’ - This is a service fee payable to Growth Street that is applied to either (a) the borrower’s highest balance in the previous month, or (b) 40% of their facility limit. It’s charged monthly and ranges from 0.1%-0.4% per month.

Regardless of the Risk Category of the borrower, the Market Rate paid to Growth Street investors stays the same. This is because, where a borrower pays a higher rate due to being deemed higher risk (some might call it a ‘risk premium’), the extra is paid into the LLP, a discretionary fund which may be used for the benefit of all investors as a whole. When the LLP is in use, this makes sure that risk is diversified across the platform for all borrowers and it doesn’t matter which borrower you are matched to.

What could affect your returns?

Tax - We do not deduct tax from your investment, so you may need to account to HMRC for any earnings on the platform. Depending on your tax bracket, this will reduce your net earnings by between 20-50% (i.e. from 5.3% p.a. to between 4.24% and 2.65%).

Re-investment and matching - The Market Rate we offer assumes all principal and interest earned is reinvested for a year, and that you are matched to borrowers throughout that time. You can see statistics on time-to-match rates and their impact on interest earned on our matching page.

Borrower default - If borrowers fail to pay and we call a Resolution Event (see below), you may end up earning less than Market Rate, or even losing all your investment.

Change to Market Rate - Depending on market conditions, we may choose to change the Market Rate. If we do so, your existing 30 day loans will not be affected and we will give all investors at least 14 calendar days’ notice of the change.

What happens if a borrower doesn't pay?

Unlike a term loan, our borrowers do not have a set repayment date to pay all capital and interest outstanding interest. As such, to monitor the health of the loan, we instead monitor the use of their facility, payment of monthly interest and fees and overall financial health. If a borrower fails to make a payment or no longer meets the financial conditions set out in their GrowthLine Agreement, our relationship management team will begin to more proactively monitor the customer. We always try to work with our borrowers to support them through tough times, so this will likely start out by reaching out to the customer to discuss the issue, but can progress to arranging a visit, conducting an audit, reducing the customer's credit limit, or ultimately taking legal or enforcement action. This can involve enforcing the security we hold (a debenture over the business’s assets), or if we have personal guarantees from directors, we might also take action against the directors personally.

In cases where we believe the borrower will not be able to repay in a reasonable period of time (or at all), we can decide to remove the borrower from the P2P portfolio by assigning it to the Loan Loss Provision (the ‘LLP’). It is in our absolute and sole discretion whether or not we choose to assign the full value of the defaulted loan to the LLP, however, if this happens, the LLP will repay all investors matched to that borrower in full and will then try to recover the loss from the borrower directly. Money in the LLP is held in a separate bank account and is made up of contributions from the founders of Growth Street (through equity and loans) and contributions from borrowers as part of the cost of their borrowing (the Risk Rate referred to above). The LLP is not a guarantee that you’ll get your money back and you should not rely on possible pay-outs from the LLP when considering whether or how much to invest.

If the LLP is in use then it can diversify risk for all investors. By collecting contributions from all borrowers and using those funds to cover missed payments across the portfolio, every investor is exposed to all loans on the platform rather than just the loans to they’re matched to.

If the LLP becomes depleted, Growth Street would declare a ‘Resolution Event’. In a Resolution Event:

  • all outstanding loan contracts would be assigned to the LLP;
  • all loan repayments would be collected by the LLP on behalf of investors; and
  • repayments would be paid pro rata to investors.

This will result in it taking longer than expected to get your money back, but ensures the risk of borrower default is shared amongst all investors on the platform fairly.

You can find out more about the LLP and how it works by reading our Loan Loss Provision Policy or checking out our statistics page.

What other risks are there?

Liquidity - Borrowers use Growth Street as a working capital facility, drawing down and repaying as and when they need the funds (similar to an overdraft). Every loan on the platform has a duration of 30 days and we don’t operate a secondary market, so you will not be able to exit your loans before the borrower repays. In some cases, borrowers will need the funds for longer than the 30 day loan term, so we automatically refinance their loans each month (we call this a ‘Rollover’). This ensures you get your money back when expected, while allowing the borrower to repay when it’s best for them. If at any stage there is not enough money on the platform to fund all drawdown requests and/or Rollovers (we call this a 'Liquidity Event') and we are unable to rectify the position, we will temporarily stop payments of principal and earned interest into your account and we will restrict your ability to withdraw money already in use on the platform. You will however be free to withdraw any funds that are still available in your holding account. If a Liquidity Event occurs, we will notify you as soon as possible and within five working days. It is likely however that this could result in it taking longer than expected for your funds to be repaid as borrower's notice periods for full repayment range from three months to one year. If we are unable to remedy a Liquidity Event within 90 days, a Resolution Event will be declared In a Resolution Event all borrowers are required to repay their facilities, all repayments are then pooled and distributed amongst investors proportionally - for more information on this, please see our Lender Terms available on our website.

Failure of Growth Street - If Growth Street stops trading (either due to failure or by choice), we have a wind down plan that would kick in, as required by regulation. The plan is funded by a combination of income from borrowers and a sum of money kept in a segregated insolvency-remote bank account for this purpose. We review the plan and calculation of the amount required to finance it at least quarterly. Contracts between borrowers and investors would remain binding and investors' money would always remain entirely separate to Growth Street's money throughout the wind down process. However, in a wind-down scenario, there is an increased risk that you could lose money and/or that it could take longer than expected to receive your money back. There is also a risk that your P2P agreements may cease to be managed and administered before they mature.

The Loan Loss Provision we offer 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. You can read our Provision Fund Policy here.
Written on in Investing
Chief Executive Officer