GROWTH Street is set to receive appointed representative (AR) status by the end of the year, paving the way for the business-to-business lender to take on retail investors.
The platform, which specialises in overdraft facilities, is not currently regulated by the Financial Conduct Authority (FCA). Once it is open to consumers, it will be eligible to apply for authorisation under the 36H rules which oversee the peer-to-peer lending sector.
It has applied for AR status with regulatory consultancy firm Resolution Compliance, which has full FCA approval and would mean that Growth Street can accept loans from individuals for the first time.
Growth Street, which officially launched in November 2015, currently lends out between £1,000 and £500,000 to eligible businesses, at an average rate of 15 to 16 per cent.
“Many small businesses struggle to access the overdraft finance they need from conventional banks,” chief executive James Sherwin-Smith told Peer-to-Peer Finance News.
“Meanwhile, there are other businesses that are holding on to cash and not investing it, which is holding back their growth, so we saw a gap in the market in connecting the two.”
The average loan size is £100,000 and the most common period of borrowing is around two months, although this is a flexible, rolling facility. There is a monthly interest fee of 0.4 per cent, based on peak borrowing in the previous month.
Investors can expect returns of up to 6.5 per cent. The minimum amount you can lend through the platform is £1,000, although Sherwin-Smith said they would lower the threshold once retail investors came on board.
The company is planning to move to a marketplace lending structure, akin to RateSetter, whereby it would offer floating rates, matching borrowers and lenders.
“It’s a natural consequence of rolling facilities,” said Sherwin-Smith.
Growth Street has been active in lobbying the government to make borrowing rates on business loans more transparent, arguing that small businesses are often in the dark about the total APR offered by banks, due to hidden charges.
It put forward its views in the Competition and Markets Authority (CMA)’s review of retail banking, which included business lending. The CMA has agreed and put it into its recommendations.