Growth Street Goes Live

By Ryan Weeks on Thursday 12 November 2015

Alternative Lending

Growth Street has officially launched its small business overdraft offering.

For the avoidance of confusion, Growth Street has been operating in a “proof of concept phase” for the past year – during which time the focus has been on testing the platform with a limited number of customers. Over the past 12 months of trialing, the company's customer base has reportedly managed to triple its turnover, and the platform is now ready to open up to the masses.

The platform offers flexible overdrafts of up to £150k to small businesses. The platform places a firm emphasis on cutting-edge technology. It uses cloud-based software in order to efficiently review an SME's financial data, providing an insight into the financial health of a business. Growth Street believes this technology allows it to offer better credit terms at fairer prices, and in timely fashion.

James Sherwin-Smith, CEO of the platform, commented:

“SME finance in the UK is fundamentally broken. Over the last three years there has been an almost 50% fall in bank overdraft facilities for smaller businesses and the amount borrowed has tumbled dramatically. According to the Bank of England, the aggregate balance of SME overdrafts has fallen from £21 billion in April 2011, to fewer than £13 billion by August 2015. This enormous drop has resulted in a massive short term working capital gap."

“The huge reductions in business overdrafts are restricting Britain’s fast-growing and profitable SMEs from managing their cash flows effectively.  By limiting access to this form of finance, banks are stunting SME growth. This is a situation we are aiming to rectify with the launch of Growth Street.”

Growth Street occupies the same kind of space as YesGrowth and Verus360 – the latter of which recently received a £5m loan facility from GLI Finance. Larger types of direct lenders in the UK, like Liberis and Fleximize – which operate merchant cash advance models, also occupy the same sort of space as Growth Street.

Mr. Sherwin-Smith believes that the pervasive lack of SME credit in recent times has drawn many small businesses into overly complex, burdensome invoice finance contracts with the banks. In May, MarketInvoice revealed that the nation’s banking sector has been fleecing UK businesses for £758m a year in invoice financing fees – an overcharge of £425m. That markup is the work of a complex maze of hidden fees. Sherwin-Smith offered his thoughts:

“In our view the banks are diverting SMEs away from business overdrafts towards complex invoice finance products which hide the true cost of credit.  As a result, SMEs are increasingly stung by complex contracts and extortionate opaque fees they’re not expecting. This is strangling SME growth and is the next UK financial scandal in the making. Something needs to be done, and The Chancellor George Osborne has a responsibility to address this in his Autumn Statement in two weeks’ time."

“We are lobbying Government, industry bodies and regulators to ensure that business lending carries an Annual Percentage Rate (APR). We believe this issue should form part of the wider government agenda to improve price transparency and are campaigning for a SME finance code of practice for financial promotions.”

Can Growth Street form part of the solution? 

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