Frustrated about the lack of finance available for their own businesses, Angus Dent and his colleagues created ArchOver, a peer-to-peer lending platform that helps innovative companies to borrow money at affordable rates.

IT’S a situation in which so many entrepreneurs will have found themselves – you’ve come up with a great idea to expand your business, offering a new product or service to your customers, or expanding into a fresh sector or location. All you need now is the money. And that’s where you hit a snag. While banks may be lending more cash than they were during the aftermath of the global financial crisis, that borrowing often comes at a high price, with unaffordable interest rates or unrealistic expectations about guarantees linked to the family home or other personal assets.

Step forward Angus Dent and his fellow founders at London-based ArchOver. While they were running their own businesses, they came up against that very same obstacle – so they decided to do something about it. They created ArchOver, a peer-to-peer (P2P) lending platform that allows firms that have been operating for more than two years to borrow money from lenders using its website. Companies borrow a minimum of £250,000, with interest rates starting at 7.7% a year. Since it launched in the autumn of 2014, ArchOver has helped its lenders to inject more than £65m into British businesses, bringing in more than £2.5m in interest at an average return of 7.3%. In an age when bank savings accounts are paying less than 0.5%, it’s easy to see the attraction for investors who understand the risks as well as the rewards.

“There’s no typical lender using our platform,” explains Dent. “We have a diverse group of individuals – the minimum amount that you can lend is £1,000 per project, so we have some people who simply have £1,000 to lend and then we have some other individuals who have each lent £2m in total.

“Between those two extremes, you have some people who put in £1,000 a month or £5,000 a month and some who put in £1,000 a quarter. What all of them have in common is that they’re investing on exactly the same basis – they all get the same information on the company and they all get exactly the same interest rate, which we believe is very important.

“As well as the individual lenders, we also have a small group of family offices, which tend to lend larger amounts to each project. We also have some funds that also use us to invest.

“Some larger small and medium-sized enterprises (SMEs) use us for treasury management. If they have spare cash on their balance sheet that they don’t need in their own business and want to earn a decent return on it then they can invest it with us.”

Dent and co-founders Brian Basham and Ian Anderson developed ArchOver during 2013 and then secured a £3m investment during the spring of 2014 from Hampden Group, which provides financial and business support services and manages insurance assets and underwriting capacity in excess of £2bn. As ArchOver’s parent company, Hampden has not only invested in the business itself but has also injected cash to the platform, putting its money where its mouth is and lending to other businesses.

The platform’s P2P lending has appealed to a wide variety of businesses. Autostop Leather – which has been making seat covers and floor mats for car companies such as Ford, Lexus and Toyota since 1991 – borrowed £300,000 via the platform to help it develop new products for its customers.

Ergowealth, which is based at Marlow in Buckinghamshire, was founded in 2013 by a group of financial planners. It borrowed £200,000 through ArchOver to fund the expansion of its mortgage advisory service by using its contracted revenues as security.

TLM Technologies – which offers electronic point-of-sale (EPOS), back office and head office systems – secured not one but two loans through ArchOver, injecting a combined £1.1m into the technology business. The first allowed it to replace its previous invoice finance facility with a 12-month, £600,000 loan secured against its accounts receivable, while the second 12-month loan for £500,000 was based on its contracted revenues from software licenses and service maintenance contracts.

“We started with what you might call ordinary manufacturing businesses, with factory units that produce a certain amount of goods each month,” Dent says. “We’ve then worked with a wider range of businesses, from suppliers to the construction industry through to professional services firms, such as accountants and lawyers.

“A little over a year ago, we realised that – if you look at the equity side of things – companies that have contracted, recurring revenues always attract a premium valuation because they’re predictable and stable. But there was no equivalent on the lending side of things – we thought that was a bit daft because you’re putting yourself in a position where you can’t lend to some of the most stable, cash-generative businesses.

“At the core of those businesses there is usually a very good idea, which you could say is intellectual property (IP). Those sorts of companies with strong IP tend to rent that IP in various forms, often as software or as services.

“So, we put together a service called ‘Secured & Assigned’, which takes that contracted, recurring revenue and wraps it up and almost makes it into an annuity type revenue and, in an intangible way, pops that revenue onto the balance sheet and allows us to lend against it. That extended our focus into another whole group of businesses, into software businesses, into serviced office businesses, into maintenance businesses, into wealth management firms.”

Between £10m and £12m of ArchOver’s lending in 2017 was based around that service, demonstrating the high demand for its financial products. Now, the platform’s latest step is allowing it to work even more closely with IP rich companies.

“Working in those areas led us down the road of looking at how we could help those companies fund their continuing investment in IP,” says Dent. “HM Revenue & Customs pays a research and development (R&D) tax credit, but it takes time even after the year-end to pull the numbers together, file the CT600 form to make the claim and then wait for the Revenue to cogitate.

“In the past few months, we’ve come up with a new service called ‘Research & Development Advance’, which – as the name implies – advances money against the R&D claim that’s due to the company. Two of the first companies to use it work in the security sector, with one developing facial recognition software and the other making body scanners for airports.”