Defaults, Recoveries and Losses
Recognising and Reporting
Within the peer-to-peer sector there is no unified method for recognising and reporting defaults and missed payments. ArchOver’s approach is to provide clear, concise definitions and easy to understand data.
Zero Tolerance Approach
ArchOver operates a ‘Zero Tolerance’ approach.
This approach is defined as:
- Where a Borrower has either: missed a capital payment; missed an interest payment; failed to report monthly as required and fails to rectify the issue within 14 days, we classify this as a ‘Borrower in Default’ and we will act to recover our Lender’s capital.
- If we believe a business is failing and we decide there is a material breach in the loan agreement by the Borrower, we will act in the best interest of our Lenders. This usually results in us appointing an Administrator to run the business. Where this action is taken we also classify this as a ‘Borrower in Default’.
Our Track Record
|Our Track Record||Number of Borrower(s) in Default|
Recovery and Actual Losses
When a Borrower is in ‘Default’ there are number of stages and processes we work through to carry out a ‘Recovery’ (you can learn more about our Recovery Process below). ArchOver manages the Recovery on behalf of Lenders working closely with a number of partners that excel in Administration, investigations, debt management and collection.
We can only report ‘Losses’ once we have exhausted our collections and closed the Recovery file on the Borrower. Normally, we hope most Recovery will be completed within six months but there will be exceptions depending on the complexity of the Recovery.
Cumulative Loan Book Total: The total lent by ArchOver since we launched the platform.
Amount in Recovery: Amount we started recovering in the nominated year. Note: the loan(s) in Recovery could have originated at any time in the previous three years.
Amount Losses for Year: Any Losses from the Recovery that was reported in that specific year.
The table below details our performance under the following definitions:
|Our Performance||Cumulative Loan Book Total||Amount in Recovery||Actual Losses for Year|
Understanding more about our Recovery Process
Lending to businesses carries risk. Occasionally businesses, despite the best efforts of the management teams, fail. At the heart of ArchOver’s processes and our credit and monitoring team’s activity is the goal to strive to preserve the value and integrity of our Lender’s capital.
ArchOver’s responsibility during a loan project is to monthly monitor companies and get to know the management team. This helps us foresee if a business might be struggling and engage before it gets into real trouble. If we believe the business is struggling, we will engage on a more frequent basis and will often visit with their management to understand more. We may also appoint our partners BTG to act as confidential advisors to us whilst working with the incumbent management to see what the options are for the business.
Only after we have exhausted these options will we look to appoint Administrators to protect our Lender’s security. The process of Administration is a well-defined path that looks at removing decision making from the incumbent management whilst the future for the company is explored. Options will include ceasing to trade and closing down, restructuring, refinancing or a possible full or part sale to an interested party or parties. Once the options have been removed we will work with the Administrator to pursue the best strategy to maximise recoveries for Lenders.
Other partners will now come into play: Credit Insurance providers Coface and their debt collection services will work on protracted defaults or failures of clients of the Borrower; Escalate, our no win, no fee partners who will act on all other cases providing a recovery service all the way through to the High Court. In addition, ArchOver will always appoint a senior Recovery Manager whose job it is to represent the interests of the Lenders and work with all our partners in ensuring the best possible outcome. The Recovery Manager will, via the Lender support teams, distribute regular updates and written monthly reports so Lenders have visibility of progress.
ArchOver will only collect costs for our work once Lenders have received all their capital and owed interest.
Risk Warning - Please Read
Lenders: Your capital is at risk and interest payments are not guaranteed if the borrower defaults. Historic loan default rates are not necessarily indicative of future default rates. Lending over the ArchOver platform is not covered by the Financial Services Compensation Scheme. The current average return is based on the total amount raised over the platform. It is the result of calculating the average Lender return, before tax, of every loan funded over the ArchOver platform, 22 August 2014 to 15 November 2017. Borrowers: In the event of default ArchOver will seek to recover assets to the full value of the loan.
For more information about the risks involved please read the full Risk Warning.