GROWTH Street’s interest rates have dropped for the first time since the platform opened to retail money at the end of last year, underpinning a surge in investor demand.
The alternative finance platform, which channels funds to small- and medium-sized enterprises, has dropped its borrowing costs by 10 basis points to 6.4 per cent per year, reflecting greater inflows from over 700 investors since November.
Lower returns were prompted by the platform’s marketplace rate-adjustment mechanism, which echoes that of fellow peer-to-peer player RateSetter.
Its yields are determined by the average rates of the loans matched over the previous 30 days, which in turn reflects the supply-demand balance.
“The Growth Street market rate has fallen for the first time in our history,” said Growth Street’s chief executive Greg Carter (pictured).
“As we have expanded our borrower base, we have been able to reward our rapidly growing customer base with a lower cost of credit. This is a great signal of the confidence that our investors have placed in our model.”
The firm expanded its remit to individual lenders at the end of 2016 after receiving Appointed Representative status from the regulator.
The platform typically matches all investors’ money with borrowers for 30 days, which enables the former to withdraw funds at equally short notice. Investors broadly choose to re-invest their funds automatically, it said.
Its borrowers performed steadily in the first quarter, posting a 9.7 per cent surge in revenues and profit margins of 10.4 per cent, the firm said, citing the example of fashion distributor Claret Showroom.
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“Our success and growth continued throughout 2016,” said the borrower.
“We required further funds from Growth Street to support our cash flow and grasp investment opportunities. Along with success came a renewed need for more capital to support growth.”