We agree an overall Facility Limit with all our borrowers, which represents the maximum amount they can borrow with GrowthLine. Your GrowthLine limit is based on your business’s working capital assets and financial performance and will be reviewed annually.
Depending on the size of your GrowthLine, you may also have a variable ‘Available Drawdown Limit’, determined in accordance with one or more Advance Rates. Advance Rates are based on your working capital assets, which can include unpaid invoices, stock, and/or work in progress. Your Advance Rate(s) and/or Facility Limit will be detailed in your GrowthLine agreement.
Your Advance Rate(s) will be clearly set out in your GrowthLine Agreement. Each Advance Rate is applied to a category of assets to determine how much you can borrow against those assets. For example, if you have £100,000 of current, unpaid invoices due, and your Advance Rate against invoices is 85%, you would be able to borrow £85,000 (provided the other conditions of your agreement with us are being met). In general, we can lend up to 85% on invoices, and up to 35% on stock and work in progress (WIP), but this can vary depending on your circumstances.
For larger facilities, we will also need to ensure you can cover the regular costs of borrowing, and can do so while remaining profitable. While you are actively borrowing using GrowthLine with an outstanding balance on your account, you will be required to pay the interest and fees associated with this borrowing every month. Your GrowthLine will have an agreed ‘Affordability Metric’ which helps us assess if you can comfortably afford your payments. This metric will be a multiple - for example, 1.5x. An affordability metric of 1.5x means that your last quarter’s, half-year’s or year’s profit* must be at least 1.5x the total cost of your borrowing with Growth Street.
In that case, if your annual borrowing costs were £10,000, you would need to show at least £15,000 in profit over the prior 12 months. If the annualised borrowing costs for your limit exceed 1.5x your profit for the past year, we may need to reduce your GrowthLine limit to ensure this condition is fulfilled.
- The way profit is measured will be agreed with you during your account setup. Typically we measure earnings before interest and tax (EBIT). In other cases we may measure your Net Profit or Operating Profit. Depending on your business’s reporting, we may use annual, half-yearly or quarterly data to assess affordability.