How we’re acquiring high-quality borrowers

This piece covers some recent developments on the Growth Street platform. We want to give our investors insight into how Growth Street is working, and what you should be looking out for in the weeks and months to come. Read on to learn more.

The big picture 

While we - and many other alternative finance providers - have offered new options for businesses looking to access funds, the climate remains challenging for many small- and medium-sized enterprises (SMEs) seeking finance. In recent years, the government has launched initiatives such as the Funding For Lending scheme, hoping to make it easier for businesses to borrow. However, statistics show that total lending to SMEs has actually decreased in the last 5 years. Lack of access to credit has been a major problem for companies of this size for many years, exacerbated by dissatisfaction with traditional finance providers.

What does this mean for you as an investor? The upshot is that there are thousands of growing, profitable businesses in the UK who are looking for finance, providing potential investment opportunities. To bring us closer to these businesses, we’ve brought on board highly experienced leaders in SME lending. This year, we’ve welcomed Chris Weller (Commercial Director); Nick Owers, Michael Ellis and Peter Olasoji (Business Development Managers); Julie Warren (Director of Marketing), and Nicola Weedall (Head of Relationship Management). These senior figures have all joined our team to help us increase the number of businesses using our GrowthLine product.

Our product

Growth Street offers a distinctive borrower product: GrowthLine. GrowthLine acts much like an overdraft, allowing businesses to draw down funds and make repayments within their limits as often as they like in a given month. GrowthLine is specifically designed to cater to the needs of profitable businesses looking to expand and develop their operations while sustainably managing their cash flow and working capital. These companies typically desire a simple and flexible solution, and this is what GrowthLine is designed to be.

Acquisition strategy

We’ve been working hard to let great businesses know what we’re about at Growth Street.

When it comes to generating more demand from borrowing businesses, we have two primary acquisition strategies. Firstly, we reach out to growing SMEs directly, seeking to understand their growth plans and work with them to establish whether they could be a good fit for Growth Street.

Secondly, we work with commercial finance introducers. These are specialists who help businesses find finance products that meet their needs. We are patron members of the National Association of Commercial Finance Brokers, and in recent months we have run many events and meetings to introduce Growth Street and GrowthLine to the industry.

Who are our borrowers?

We operate across England, Wales and Northern Ireland, but we have been focusing our activities on three key regions: London, the Midlands, and the North West. Our borrowers typically - but not exclusively - operate in wholesale, manufacturing, construction, recruitment, and professional services. These are all sectors where borrowers can face cash flow and working capital pressure, which GrowthLine can alleviate.

Many growing businesses experience a gap between the cash they have available and the cash they need. While we remain focused on accommodating the needs of these businesses, it is vital to maintain the high credit standards and rigorous underwriting procedures we have in place. Growth Street’s loans are secured against business assets, and we pride ourselves on working with high-quality businesses. Accounting data provided by our borrowers shows that in the 12 months to July 2017, Growth Street borrowers collectively generated revenues of £212.7 million, boasting collective profits of £22m. Over the same period, Growth Street’s borrowers grew at an impressive rate of over 20% year on year. (Past performance is not a reliable indicator of future results.)

Is it working?

Our efforts are paying off. We have seen a significant increase to total borrowing on the platform in recent months, which has had positive knock-on effects to the investor experience. November has seen a reduction in the time it takes our investors to get their money matched with a borrower, and we expect this time to match to reduce further in December, when we’re predicting a significant increase in demand from our borrowers. By early 2018 we aim to reduce the average time to match to less than 24 hours, and we aim to maintain that speed of deployment throughout the year.

What next?

If you’ve been waiting for borrower demand to catch up with the supply of capital from investors before you increase your investment on the platform, we anticipate that conditions will improve significantly in the next few weeks. (Remember, you can always keep an eye on the current lend order queue here, as well as the average time to match.)

In the coming days, we will be announcing further changes to our investor product, which we are implementing as a direct response to your feedback. As always, please continue to let us know if you have any questions, suggestions or comments.

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

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Copyright © 2017, Growth Street Exchange Limited. All rights reserved. Growth Street Exchange Limited is registered in the UK, company number 09495712. Growth Street Exchange Limited is an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (no. 574048).

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Chief Executive Officer