A study produced by independent research house Equity Development has concluded that ArchOver’s ‘secured and insured’ business model represents best practice in the P2P crowdlending sector and “perhaps even represents the future of corporate lending to SMEs worldwide.”
Commenting on the safety of the sector as a whole, analyst Paul Hill says that “credit vetting procedures are at least on par with the high street banks” and predicts that “going forward, across the economic cycle, a diversified portfolio of P2P loans should be able to generate ‘relatively predictable’ returns of circa 5% per annum (net of costs and defaults).”
Mr Hill also rejects Lord Adair Turner’s recently expressed negative outlook for the P2P sector, predicting instead that “We still think it is possible for risk tolerant investors to generate healthy returns from holding a basket of non-correlated, fixed income P2P loans in today’s low interest rate environment.”
The report records that ArchOver has arranged 81 loans collectively worth £15.2m without so far incurring any late payments. It places ArchOver’s loan portfolio in the band between S&P’s lower investment grade (BBB) and upper high yield (BB-) ratings.
The study concludes that “The P2P sector appears to have an attractive future ahead of it, involving plenty of years (if not decades) of strong growth. ArchOver’s unique ‘secured and insured’ proposition represents industry best practice and, in our opinion, is a powerful differentiator to attract lenders and creditworthy borrowers alike.”
Responding to Equity Development’s findings, ArchOver’s CEO Angus Dent said: “It’s always gratifying when an independent source says positive things not just about your organisation, but also about the sector in which it operates. There are a lot of players in the P2P sector and, in the fullness of time, we will all have to face more difficult times which will result in casualties and some inevitable industry consolidation. However, in the meantime, creditworthy SMEs are gaining access to the funding they require and lenders are earning a decent return on their money.”