Nobody could ever accuse Julie Ashmore, commercial director of fintech Growth Street, of resting on her laurels.
In various bits of her spare time, she has trekked to both the South Pole and the North Pole, sailed the Atlantic, and been awarded an MBA at Henley Business School, on top of being a mother of two children and, of course, keeping on top of her full-time job.
Ashmore joined Growth Street in June 2018. In the last year since being at Growth Street, Ashmore has overseen a doubling in the amount being lent to businesses.
Growth Street offers a unique type of business finance through its GrowthLine product, a hybrid between invoice finance and a traditional – and increasingly rare – overdraft facility. Since launching in 2014, Growth Street has lent more than £100m through its platform.
This year, Growth Street raised a total of £17.5m of backing in two funding rounds led by Merian Chrysalis and Arts Alliance.
Growth Street currently employs about 70 people, with newly opened offices in Manchester, Birmingham, Leicester, Glasgow, Cambridgeshire and Essex, in addition to its London headquarters.
‘That was the moment I realised, I’m willing to take risks, willing to push boundaries’
Ashmore has a storied career as a financier lending to small business.
She started out in corporate banking at NatWest, where she stayed for eight years.
In 1994 she moved to Kellock, the then invoice-finance arm of Bank of Scotland, as an account manager lending to small businesses ranging. Her clients ranged from a tiling manufacturer to spectacle makers and haulage firms.
“I started to see how forms of finance could grow with businesses at a very hands-on level,” she says.
She then moved to Bibby Financial Services in 2001, which only offered invoice finance, where she stayed for 13 years, setting up an office in Warsaw, Poland – despite not speaking the language – and eventually becoming UK operations director.
(Invoice finance is where you take assignment of invoices from the customer, lending about 80pc against of its value in advance.)
“That was the first insight I had into a start-up type culture within small business finance, and that excitement spurred me on.”
In 2013 Ashmore moved to HSBC, first as regional director of invoice finance, and then in 2015 being promoted to head of SME lending for four years.
Ashmore says: “Culturally, there was a desire by HSBC to be creative and innovative when lending to small businesses but even when I had senior leaders showing support, we found it very difficult – we had to contend with legacy IT systems, culture…”
What’s holding back UK high-street banks from lending?
The banks’ ability and appetite to lend to small businesses, including overdrafts, is constrained by regulators’ capital holding requirements. Ultimately, if you wanted a working capital facility, only a small percentage were given an overdraft. Yet customers still wanted a vanilla overdraft – we just had this mismatch between what small businesses wanted and what banks could offer. Invoice finance works much better product for a small business. That’s where banks wanted customers to go.
For some customers, invoice finance works perfectly but clearly not for all. The invoice finance market is stagnating at about 44,000 businesses in Britain, which hasn’t changed in many years.
And that’s the conundrum. How do we provide the facilities that small business wants; an overdraft-style, working capital facility with a lower level of active management and more control over their facility?
Is that what Growth Street is then? Invoice finance?
No. We’re looking to transform the overdraft. It’s an overdraft-style working capital facility. It’s back to how banks used to lend against assets on the balance sheet: we lend against debtors, stock held and work-in-progress.
We’ve developed a credit-decision model that extracts data from the client’s cloud accounting package, which makes decision making quicker. We’ve got a partnership with Xero. We can see the information we need in real time to assess the risk.
What do you mean by work-in-progress?
Say you’re in construction and you’re in the middle of building houses or a manufacturer piecing together a complex product with various imported parts – that could be a work-in-progress that’s not yet invoiced. It’s not raw stock but it’s not fully completed debtors. There are a lot of businesses that have a lot of cash tied up like that.
How much can my small business borrow?
Anything from £25,000 up to £2 million. The average amount we lend is £300,000 per customer in a revolving credit facility. It covers from micro businesses first dipping their toe into needing finance through to more substantial businesses. The facility can go up and down, according to the needs of your business.
What kind of customers are you looking for?
We are looking for businesses that have been through year one of trading and have filed their first set of accounts. We’re looking for profitable businesses trading with other businesses, so you have debtors. If you’re a growing business with invoices and stock and work-in-progress, that’s what we’re looking for.
How many clients do you have on your books?
We have about 200 active clients right now.
How much will a Growth Street facility cost me?
Our rates are aligned with overdraft rates.
First, we charge a service fee equivalent to 0.4pc per month of the amount borrowed for the facility. We also charge daily interest rate from 7.2pc based on risk.
How long does it take you to decide whether to lend?
We can give a strong indication in anything between 24 and 74 hours, providing we have the right information. Increasingly, small businesses are using cloud accounting.
What’s the biggest hurdle you face explaining the GrowthLine concept?
Sometimes the fact that our product is so flexible is difficult to convey. We’re similar to invoice finance but we’re more like an overdraft.
Also, using the label alternative finance sounds expensive and new-fangled. There’s the misconception that you only apply for alternative finance if you’ve been turned down everywhere else, which is simply not the case. We’re definitely not the lender of last resort. We can sit alongside a loan product and an invoice-finance product.
What growth plans does Growth Street have for itself?
When I joined we were lending £16m each year. Today, we are lending £36m. We have a four-year plan to become a £1bn business. Since the financial crash in 2008, the banks have dialled back their overdraft volumes by 50pc. In that same time, the number of UK SMEs has risen by 30pc, creating a £18bn funding gap. Growth Street aims to plug £1bn of that funding gap. Over the coming year, we plan to double the amount we lend businesses compared to the £36m we have out on loan today. And we plan to have £1bn lent by the end of 2022 as more businesses find out about us.