Growth Street launches to address SME overdraft crisis
Growth Street, a new business overdraft platform, has launched today to address the chronic lack of overdrafts for SMEs in the UK. The company offers flexible business overdrafts of up to £150,000. Growth Street uses innovative, cloud-based software to review SME financial data, offering insight into the financial health of a business, resulting in better credit terms at fairer prices.
James Sherwin-Smith, Growth Street’s CEO, said “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.”
SME finance is the next financial scandal in the making
Sherwin-Smith continued “With the dramatic decline of the business overdraft, we have seen the rise of the fast growing, unregulated invoice finance market, which has grown 25% in the last three years according to the Asset Based Finance Association.
“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”.
Support for the campaign
Brian Moore, spokesperson for the Campaign for Regulation of Asset Based Finance, comments: “We continue to be contacted by directors of SMEs concerned with the unacceptable complex terms and pricing tariffs employed by invoice financing providers that hide the true cost of credit. This is hidden in admin fees, disbursements and the providers’ forced insurance cover – often resulting in an APR of nearly 100%.
“This is a license to print money at the expense of firms that are being turned away from traditional finance such as overdrafts.
“At long last we have an alternative finance provider who is leading the market by offering a transparent alternative for SMEs seeking short term credit.”