Tag: insured

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 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.”

BUSINESS AS USUAL AT ARCHOVER

Author
Alex Taylor
Date
It took less than two hours yesterday (June 27) for lenders to snap up a £150,000 business loan on ArchOver’s ‘Secured and Insured’ crowdlending platform. The 12 month facility, offered on behalf of rapidly-expanding accountancy firm Spain Brothers, was the first new transaction to appear on the platform since the EU Referendum result was announced last Friday. Lenders will receive a return of 8% per annum.
Commenting on the loan, ArchOver CEO Angus Dent said: “We don’t yet know exactly what the future holds, but, far from retreating, we see this as a period of opportunity. We can demonstrate that the ArchOver platform remains in good working order for the benefit of ambitious SMEs and discerning lenders. Successful companies have clearly not lost the confidence to raise the finance they need to develop and grow their businesses, while lenders have equally not lost their appetite for keeping their investment returns as high as possible in this uncertain world.”
“It speaks volumes for the loyalty of our lenders who clearly appreciate our easy-to-access systems and trust our ‘Secured and Insured’ model to safeguard their interests as well as deliver attractive returns.”

24th Hour Failure (To finish first, first you have to finish)

Author
Angus Dent
Date

This weekend saw a huge disappointment in the ’24 Hours of Le Mans’ race, leaving the Toyota team questioning what happened, to watch success slip away in the last 3 minutes of this gruelling challenge, was heart-breaking for those involved and the most fascinating viewing for the interested spectator and commentator. 

Ultimately, it appears that one vital element led to the subsequent defeat, and handed the victory to the consistently tried and tested model of their competitors in the Porsche team. On what was the most important day in the calendar with glory a single lap away the failure of one part of the package turned the whole effort into embarrassment and widespread press coverage for all the wrong reasons.

Great story – but what does this have to do with the P2P space…..? A lot of common themes and messages can be taken from this story 

Let’s look at the top teams on the starting grid in the race……they all had roughly the same size team behind them, with what at face value appeared to be the same skill set and knowledge. All of the cars looked pretty identical from the outside, bar the different splashes of colours identifying their team allegiance so why would one fail so spectacularly at the critical moment?

The answer lies under the bonnet – look at all the components, the chassis, the aero package, the engines etc.  perhaps at a glance they look the same but they are not. It’s the whole package that must be fit for purpose, if 1% isn’t then abject failure will result. That elusive, in the case of Toyota, 1%, became the difference between success and failure, being lorded in the press or blasted for a simple error of judgement and engineering.

24 hour le mans

The alternative finance sector is seen by most on the outside as one identical group of organisations, all competing under their own branded team colours for the same purpose and all on the starting grid in identical vehicles. Lift the bonnet however and you’ll see huge differences that will optimise an organisation to success, or cause them to crash out of the sector in a blaze of (non) glory.


 Unlike the image of the homogenised group of lenders, grouped together in the media and by less informed bystanders under the title ‘P2P’ there are actually numerous variations of platform, offering, expert teams and niche areas all operating in this field. Each has their own reason to believe they should be first across the line, many will stumble at the first hurdle due to lack of due diligence and not robust enough offerings or platforms. Some will look like they are in it for the win, only to fall foul to that elusive 1% of information, security or expertise and simply roll across the finish line in failure place (there’s no second or third) – to the delight of the watching crowd – who want to be entertained by stories of failure.

 

Please visit www.archover.com to find out more about our winning proposition.