{"id":5902,"date":"2020-06-22T16:48:01","date_gmt":"2020-06-22T16:48:01","guid":{"rendered":"https:\/\/sloane.co.uk\/finance\/small-businesses-blindsided-by-growth-street-demanding-its-money-back\/"},"modified":"2020-06-22T16:48:01","modified_gmt":"2020-06-22T16:48:01","slug":"small-businesses-blindsided-by-growth-street-demanding-its-money-back","status":"publish","type":"post","link":"https:\/\/sloane.co.uk\/finance\/news-finance\/small-businesses-blindsided-by-growth-street-demanding-its-money-back\/","title":{"rendered":"Small businesses blindsided by Growth Street demanding its money back"},"content":{"rendered":"
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Dozens of small businesses that borrowed money from peer-to-peer lending platform Growth Street have been told they must repay their loans.<\/p>\n

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Growth Street, which has lent \u00a317.5m of investors\u2019 money to 116 small businesses affected, is exiting the peer-to-peer market, giving them just three months\u2019 notice to repay their debts.<\/p>\n

The average amount owed is \u00a3148,122, with London and the South East accounting for 41 per cent of all borrowing, according to SME financier Rangewell.<\/p>\n

>See also: HSBC handling of bounce-back loans branded \u2018shambles\u2019 by businesses<\/span><\/a><\/strong><\/p>\n

Loans repaid will be redistributed to Growth Street\u2019s peer-to-peer investors in quarterly instalments, with any losses shared equally.<\/p>\n

Astonishingly, not one of the affected businesses has missed a loan repayment to date.<\/p>\n

A letter sent by Growth Street to borrowers, seen by the Times<\/a><\/em>, concedes that the wind-down is \u201clikely to be disruptive to your business\u201d.<\/p>\n

Back in March, Growth Street\u2019s peer-to-peer investors panicked because of Covid-19 and extracted their cash from high-risk lending to small businesses as fast as possible. To try and haemorrhage the investor stampede for the exit, Growth Street initiated a \u201cliquidity event\u201d, telling small business borrowers they had to repay their loans within three months.<\/p>\n

>See also: 20% of small businesses can\u2019t reopen with social distancing in place<\/span><\/a><\/strong><\/p>\n

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Although Growth Street wrote to the 116 affected businesses telling them they do need to be repaid within three months, this is a legalism, according to one source, and Growth Street has been mindful of the predicament it has left small businesses in, trying to tailor individual repayment plans and helping to find new lenders to take over its positions.<\/p>\n

One source said: \u201cThey are trying to minimise the disruption. And, unlike collapsed P2P platform Lendy<\/a>, they\u2019re not walking away.\u201d<\/p>\n

However, given that Growth Street raised \u00a318m from fintech investors Merian Chrysalis and Arts Alliance last year, it is unclear why it has not gone back to its equity investors and asked them to cover the outstanding debts. That way, repayments could continue as normal without the high chance of small businesses being unable to repay the entire amount.<\/p>\n

Although it is barred, as a peer-to-peer lending platform itself, from accessing Government coronavirus business support, there is nothing to stop the affected businesses converting their Growth Street debt into a coronavirus business interruption loan \u2013 providing of course they find a wiling lender.<\/p>\n

The London-based company\u2019s Growthline product, described as a cross between invoice finance and an overdraft, provided flexible working capital loans of between \u00a325,000 and \u00a31m to small companies.<\/p>\n

Only this time last year, Growth Street said that it planned to lend up to \u00a31bn a year<\/a> to small businesses by 2022.<\/p>\n

Last week, Growth Street announced it was phasing out peer-to-peer lending to concentrate on finding institutional debt funding.<\/p>\n

Paolo Lepore of Rangewell, which is working with some of Growth Street\u2019s businesses trying to swap out its money, said that some Growth Street borrowers may be eligible for the CBIL scheme but it won\u2019t be a case that Growth Street\u2019s clients will be able to simply just move to another lender en masse as there is no direct match to what Growth Street offered.<\/p>\n

Lepore said: \u201cRangewell are already working with a number of Growth Street borrowers and, although it\u2019s not going to be easy, we\u2019ve had a good response from our lender panel to date \u2013 we\u2019ve spoken to over 15 lenders from the high street banks to niche lenders who have expressed interest in the proposals we\u2019ve discussed to date.\u201d<\/p>\n

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Growth Street tries to claw back \u00a318m in loans from dozens of small businesses in order to repay panicked peer-to-peer investors<\/p>\n","protected":false},"author":2,"featured_media":5903,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[33],"tags":[],"_links":{"self":[{"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/posts\/5902"}],"collection":[{"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/comments?post=5902"}],"version-history":[{"count":0,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/posts\/5902\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/media\/5903"}],"wp:attachment":[{"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/media?parent=5902"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/categories?post=5902"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sloane.co.uk\/wp-json\/wp\/v2\/tags?post=5902"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}