Tag: ArchOver

Industry Profitability

Author
Angus Dent
Date

Throwing huge sums of money at a new or particular market in order to achieve dominance is nothing new. The corporate landscape is littered with the financial corpses of over-zealous entrepreneurs who hurtled down the growth path without sparing a thought for the day of reckoning when someone – usually one of the backers – pauses to ask when all this investment is going to result in a profit. The ‘jam tomorrow’ argument eventually wears thin.

Some commentators are already starting to pose the question in relation to the long term future of Alternative Finance providers, including P2P business lenders like ArchOver. It is a fair question since it is no secret that the largest players in the sector – companies like Funding Circle, Ratesetter and Zopa – have all posted bumper losses as if there was some kind competition running to see which of them could lose the most money fastest. The observation that the vast majority of Altfi operators have never been through an economic recession is equally true. Eventually, the music has to stop and there will be some casualties, at which point the pundits will doubtless have a field day.

profitability

In the meantime, it is not for us to question the wisdom of others in our sector – we can only speak on our own account. The dash for growth at the expense of profitability or, more importantly, quality has not been the ArchOver way because there has been no need to adopt such a strategy. We are not under pressure from voracious venture capitalists who simply want their money back plus a massive return for their trouble. ArchOver is backed by a 300 year-old institution with a proud reputation to maintain – something infinitely more precious than making a fast buck.

ArchOver’s approach to the vital due diligence processes, backed by the ‘Secured and Insured’ model, not only works, but has been seen to work. £25m of loans facilitated over two years with no losses and no arrears is a considerable achievement. Whether individuals, family offices or small institutions, all of our lenders have been treated equally and have received exactly what they were told to expect at the outset.

On the flip side, borrowers over the ArchOver platform have been treated fairly, with no nasty surprises in terms of hidden fees or charges. The fact that many have returned to seek more finance is testimony to the appeal of our business model and the way in which they have been treated by the team.

 

Telegraph Hub: How P2P can help your business grow: five key incentives

Author
Angus Dent
Date

ArchOver has teamed up with The Telegraph to produce a series of articles to help educate investors on the UK Peer-to-Peer Lending sector. In a brave new economic and financial world, understanding different ways of managing your money is key to success. P2P Lending can help both individuals and businesses navigate a post-Brexit world, with the reassurance that it is a secured and effective method of protecting and growing your money.

Peer-to-peer lending is becoming an increasingly popular way for businesses to get the money they need to expand.

According to recent figures from the Cambridge Centre for Alternative Finance, alternative finance business lending is 12pc of the market for lending to small businesses in the UK.

“These new channels of finance are increasingly moving mainstream,” says Robert Wardrop, executive director of the Cambridge Centre for Alternative Finance. Its 2015 report stated the sector had grown 84pc year on year and facilitated £3.2bn of loans, donations and investments.

Here are five ways in which peer-to-peer lending can help businesses.

1.  Speed

Getting a loan from a high street bank can be a slow process, with many forms to fill in and documents to check. Although a peer-to-peer lender will also want to carry out checks, the process is often quicker, which can help if you want to move quickly to make an acquisition or take advantage of a growth opportunity.

2.  Lack of personal guarantees

In some cases, lenders will ask directors to come up with personal guarantees when borrowing money, meaning that your own assets are tied to the repayment of the loan.

Some peer-to-peer lenders, such as ArchOver, do not ask for personal guarantees, relying instead on the assets of the borrowing business as guarantees – for example the Accounts Receivable for the company.

 business-growth

3.  Better fit with some types of company

Not every company has a plan that makes it easy to get a bank loan or equity investment. The repayment schedule may not work with your company’s cash flow and expansion plans, for example. In some cases a P2P lender can be more flexible.

4.  Value

While bank loans can be competitively priced, few companies can access them. Many companies have access to invoice financing but this is expensive and difficult to manage. P2P is usually cost-effective, easy to manage and readily available. Of course, it pays to compare the two.

5.  Maintaining control

Other ways to fund your business, such equity crowdfunding or venture capital, involve giving away a proportion of your business in return for the money. P2P borrowing allows you to maintain control of the company.

Telegraph Hub: How P2P is Bridging the Business-Loan Gap

Author
Angus Dent
Date

ArchOver has teamed up with The Telegraph to produce a series of articles to help educate investors on the UK Peer-to-Peer Lending sector. In a brave new economic and financial world, understanding different ways of managing your money is key to success. P2P Lending can help both individuals and businesses navigate a post-Brexit world, with the reassurance that it is a secured and effective method of protecting and growing your money.

As interest rates dive, new ways of raising returns on cash are sparking interest.

With the Bank Rate at a record low of 0.25 per cent and those with cash looking for reasonable returns, the peer-to-peer (P2P) lending sector is receiving a boost.

P2P lending sites offer businesses the chance to borrow money from individuals in order to expand, bypassing difficult-to-obtain high-street bank loans and replacing inflexible and sometimes pernicious invoice discounting facilities.

Some lenders receive returns in excess of 7 per cent on P2P lending sites, but risk losing their cash if the business goes under. This is the issue that Angus Dent, chief executive of P2P platform ArchOver, believes he has addressed with a unique form of security for lenders.

Mr Dent, a chartered accountant and technology business expert, founded ArchOver after realising there was a gap in the market for medium-sized loans for growing businesses.

“If you needed a £50,000 overdraft you could probably get it from your bank and, if you needed more than £3m, you could approach a venture capitalist,” he says. “But there wasn’t any reasonable way you could raise, say, £500,000 or so for your business.

“We also saw there were an awful lot of people who had money on deposit that wasn’t doing very much. ArchOver aims to put those people together in a way that is rewarding for everyone. The name refers to our platform, which arches over from the people with cash to those who want to borrow.”

Loans made through the ArchOver platform are “secured and insured”, which Mr Dent says provides “unparalleled investor protection”. The security policy involves insuring each borrower’s accounts receivables – the money owed by their customers for goods and services that have already been delivered – against the loan.

The main reason why company borrowers don’t repay loans is because their customers don’t pay them. Credit insurance successfully mitigates this risk. Given that most of the borrowers take credit insurance from Coface – an A- credit-rated supplier with a very good record of meeting claims, which represents a significant safeguard for lenders.

Different types of lending provide different types of security, and different types of security offer different levels of liquidity. By securing loans on Accounts Receivable he believes the security is relatively easy to value and liquidate, meaning that the likelihood of getting your money back in the event of a disaster is high. This compares well with property, which is often held up to provide great security, but which is difficult to value and often illiquid. That said, lending should only form part of a diversified portfolio of investments. “We believe people are grown-ups and should do their homework on their investments,” he adds.

The minimum that an ArchOver user can lend to any one borrower is £1,000, an amount that he believes means people will carry out the correct amount of research. “Most people will take an investment of £1,000 seriously,” he says, suggesting ArchOver is suitable for those with a portfolio of different investments, including those people who are managing their retirement income. “Our oldest lender is 89,” he confides.

business-finance

Lenders are encouraged to find out more about the company that they will be lending to, including the reason for borrowing the cash.

Some of the businesses that have borrowed from ArchOver have included timber frame restoration specialist TRC, healthcare service provider Spirit Healthcare and accountancy business Spain Brothers. In each case, the company found ArchOver offered a better service, a combination of lower price, much lighter touch processing and no personal guarantees than they could get from a bank or invoice discounter.

So far ArchOver has facilitated £22m of loans with no defaults or losses, and Mr Dent believes the uncertainties created by the Brexit vote could further increase demand for the product. “While some businesses will decide not to expand, others will need to find growth finance and, with interest rates at 0.25 per cent, there is more demand than ever from those with cash who are looking for new ways to make their money work for them.”

ArchOver and GapCap form strategic alliance to extend market reach

Author
Alex Taylor
Date
ArchOver and GapCap, which both specialise in providing loans to SMEs secured against invoices, have signed a formal Service Level Agreement which will enable them to cross-refer and share future business opportunities. ArchOver secures its loans against whole books of borrower companies’ Accounts Receivable (debtor invoices) whereas GapCap provides loans secured against selected individual invoices.
The intention is either to refer business where one or other platform is most appropriate to the particular circumstances, or to combine to provide borrowers with a double layer of finance: ArchOver to provide fixed term loans for basic working capital and GapCap to offer top up facilities to meet the cyclical needs of the same business.
Commenting on the agreement, Angus Dent, CEO of ArchOver, said: “Both organisations work in the same sector, but from different ends of the business spectrum. We often come across situations where we are either not in a position to help or are perhaps not the right people. The arrangement with GapCap means that, in some instances, we won’t need to turn the borrower away, but to send them along to GapCap who might be able to provide the help required.”
“In certain situations we will be able to lend alongside each other to provide borrowers with a real Alternative Finance solution that they would be unlikely to get from any bank.”
Alex Fenton, the founder and CEO of GapCap, said: “We are both operating independently in a busy and competitive sector and that situation will remain. However, this sensible collaboration can benefit UK SMEs trying to find the right funding solution to suit their particular circumstances.”
“On a broader scale, we see the collaboration between two finance sector disrupters as something of a ‘first’ in the Altfi industry. It’s not something the banks do, either, but ultimately this has to be to the benefit of smaller businesses looking to find flexible solutions to their financial problems. ”
ArchOver offers crowdlenders the opportunity to invest across its platform for secured returns of up to 8% per annum; it has raised over £17m for SME borrowers since it began operations in September, 2014. The Accounts Receivable, over which a first charge is taken and registered at Companies House, are protected against default by credit insurance provided by Coface, one of the largest credit insurers in the world.
Since inception in June 2014, GapCap, whose finance is provided by specialist funds including Advance Global Capital (AGC), is growing fast. The company, which provides borrowers with finance for up to 85% of invoice value within 24-48 hours, has helped clients of all sizes with annual turnover figures ranging from £80,000 to £17m.