Growth Street Review
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4thWay's Quick Expert Growth Street Review
A professional company with solid defences against losses
Growth Street Review: their best-rated product
This account is currently paying 5.3% interest after bad debts.
When did Growth Street start?
Established in 2014 with total lent of £52 million.
What interesting or unique points does Growth Street have?
Growth Street's loans are similar to bank overdrafts to businesses: flexible lending facilities that borrowers can draw more on or pay down, as needed. Unlike overdrafts, these facilities are also secured for lenders' protection, mostly against the money owed to the business borrowers by their customers.
Growth Street* is highly innovative. It integrates with its business borrowers' monthly accounting systems, so that it has the potential to notice if the borrower's financial situation is starting to go downhill. It can then require the borrower to pay debt off much faster, before trouble hits – and while the borrower can still afford to make large payments. It can also divert payments from the business borrowers' customers directly to Growth Street.
Growth Street has athat easily covers expected bad debts on most loans, although some loans are unusually large and not easily covered.
How good are its loans?
Growth Street's loans have mostly been satisfactory. The number of loans that turn bad is sufficiently low and within expectations for this kind of lending.
We don't receive data from Growth Street onin a way that makes it easy to measure its quality. But that is at least partly due to the nature of overdraft-like facilities: the often changes regularly, making it difficult to pin down.
Still, Growth Street* has typically recovered around 45% of a bad debt when given at least eight months to do so. This is reasonably satisfactory for these kinds of loans. It might improve a little bit further as more recoveries are made.is intended to reduce bad debts and so we can see its impact by using Growth Street's actual results. After loans turn bad,
The quality of its loans has recently been overshadowed by the size of them. Some loans are very large, so that if just a few turn bad they could lead to far lower returns. In a worst-case scenario, they might also lead to temporary losses, although these should be offset by interest earned over a few years – whether the interest is earned before or after the loans turn bad.
Indeed, Growth Street recently chose to use £3 million of its own money to cover just two bad debts, so that it did not overwhelm both the(worth £1.2 million at the time) as well as a whole year's lending interest. Growth Street has now taken some steps to reduce the risks, including halving the maximum loan size, but they still remain a potential risk for lenders.
How much experience do Growth Street's key people have?
Growth Street has the key skills we'd expect to see, but they are learning that the specific type of lending they do, and the intricate defences they lay to protect lenders, requires more finetuning. Importantly, they are accepting this and making changes, which is not always the response we see atproviders.
I am still to interview the new key lending decision maker and conduct background checks. I hope to do so in March 2020.
Growth Street review: lending processes
Growth Street* extensively uses predictive technology, fraud databases, integrated accounting, and financial and credit history checks in order to assess a borrower for a loan as well as to set interest rates. It's an impressive set of tools that will become more powerful as time goes by. Growth Street can measure its results against more completed loans and use the information provided by those tools to improve results further.
The borrowers' situations are constantly monitored and Growth Street can amend borrower interest rates with just 30 days' notice.
It's bad-debt recovery processes have started to pay off, as I said earlier, with about 45% of bad debt being recovered.
It's good to see that this P2P lending platform reacts quickly to potential bad debts as well as actual bad debts. This hugely increases the chances of getting lenders some or all of their money back and shows self-confidence from the platform.
How good are Growth Street's interest rates, bad debts and margin of safety?
Growth Street* has demonstrated good selection of business borrowers. For overdraft-like lending often backed by invoices, its record of nine out of every 100 borrowers being classed as at some point is not surprising.
After two very large loans went bad, Growth Street is now looking into the interest rates it charges borrowers. I hope to see it raise rates on some loans so that it can either pay more into theor more to lenders, to cover the risk of potentially large bad debts.
If it wasn't for the large loans, Growth Street's lending account would have a 3/3 “Exceptional”instead of a 1/3 Rating. This is because, large loans aside, the interest rates are good for the risks involved, with a big safety margin in the event of severe economic disasters.
The lower rating of 1/3 reflects the additional possibility of making losses in some years from an unfortunate number of large loans going bad simultaneously.
Has Growth Street provided enough information to assess the risks?
Growth Street went through a patch last year where it was too slow to provide 4thWay with data, but in 2020 it's now back on track. It's usually very transparent, if a little slow, at giving us access to its key people, and also to its data, which enables us to assess most details of its business using risk modelling and investing techniques.
Is Growth Street profitable?
Growth Street, like most P2P lending sites in this new industry, is not yet profitable. That said, we think it is technically agile, and it has a unique offer that could place it well for continued success. It has plans and funds in place for a smooth wind-down in the event that it does close its doors. It received an additional £17.5 million from investors in 2019 (£3 million of which was diverted to pay off the large bad debts).
What is Growth Street's minimum lending amount and how many loans can I lend in?
Lenders’ money is automatically spread across all outstanding loans, which greatly reduces the risks.
The minimum lending amount is £10, which is spread across all live loans and redistributed daily as new loans are made. I believe lenders will be sufficientlyacross enough loans almost immediately.
Does Growth Street have an?
Growth Street'sis currently paused to new lending. This is because its structure is such that it got caught in new rules laid down by the UK's financial regulator related to non . We'll let you know when Growth Street has changed its structure and reintroduced its .
Growth Street's regular P2P lending account is not affected.
Growth Street has a cashback deal for new and existing lenders of up to £2,000 cashback. Read about it here.
Growth Street: key details of its Classic Account
3 PLUSes is best.What does the tell you about the risks and rewards?
Interest rate after bad debt
Here we show the P2P lending site's own estimate
Lower Risk Scores are better. How is this different to the ?
Growth Street Quick Expert Review: a professional company with solid defences against losses
Established in 2014 with total lent of £52 million. Growth Street's loans are similar to…Read the full review here
Independent opinion: the opinions expressed are those of the author and not held by 4thWay. 4thWay is not regulated by the ESMA or the FCA, and does not provide personalised advice. The material is for general information and education purposes only and not intended to incite you to lend.
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