Growth Street to make redundancies as axes "hybrid model" and shifts to digital-focused approach

By John Reynolds on Tuesday 5 November 2019

Alternative Lending

The move follows Growth Street being hit by two loan defaults.

Growth Street to make redundancies as axes
Image source: Image of Greg Carter

Peer-to-peer lender Growth Street is making a number of redundancies as it axes its existing "hybrid" business model and shifts to a digital-focused approach.

The move follows Growth Street being hit by two loan defaults.

Greg Carter, Growth Street co-founder said: "After extensive analysis and consideration, we have, unfortunately, decided that we can no longer deploy a hybrid organisation model, which includes both traditional and digital business development."

"As a result, there will be redundancies in the regional sales team. This is not a decision we have taken lightly and we want to thank those affected for their service to Growth Street."

The redundancies will primarily impact Growth Street’s regional sales staff and are thought to reduce Growth Street's headcount from more than 70 to around 50, according to Financial News.

Growth Street, however, would not confirm these numbers.

The job cuts follow Growth Street contacting its lenders telling them that two loans, valued at more than £1m, had defaulted.

The London-based peer-to-peer lender said it had told investors that the cost of the two defaults would be registered on the company's balance sheet.

It said this was "to protect investors from being exposed to losses from these two facilities, and to allow Growth Street the time and flexibility to maximise recovery".

Growth Street is now changing the way it sources its loans and will concentrate on its digital partners, the digital challenger bank Starling and Xero, the accounting software platform.

It said by shifting its model it aims "to increase the number of borrowers that find its service through partnerships”.

"The new model will help offer a better risk profile to its investors, too, by increasing the number of borrowers and lowering GrowthLine limits. Growth Street's enhanced digital capabilities will also reduce the time taken to assess a business's credit-worthiness,” the company said.

Carter added: “We have been delighted at how quickly Open Banking and cloud accounting tools have been embraced by UK SMEs. This has allowed us to accelerate aspects of our longer-term strategy.”

“We are excited to announce that we are now able to make the ambitious strategic move to a digital-only model.

 “Over the past year, we have forged strong partnerships with Xero cloud accounting and Starling bank, and have already begun onboarding new borrowers via their marketplaces,” he added.

“This decision will enable us to support more SMEs across the UK, more effectively and efficiently than ever before.”

Growth Street has raised more than £17m since the end of 2018. At the start of the year, it secured £7.5m of financial backing to scale up the platform.

“Over the past few years, we are proud to have become a front-runner in the world of FinTech for SMEs. The future of business finance will be through online marketplaces and this move will enable us to stay ahead of the curve.”

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