ArchOver – Surveilling the Returns

Company profile: ArchOver

P2P lending and use of technology is possibly the most impactful change of this decade. 2008 financial crisis led to the death of commercial loans as we know it. Business loans were hard to come by, ArchOver like a few others, is out there to solve the SME loan problem.

Founded in 2013, with business launched in 2014, ArchOver is based out of London and can be found under archover.com. They currently have 15 employees and provide secured and insured business loans.

The Business

ArchOver is a crowd-lending platform. They are a P2P lender to SMEs. Lenders can be individuals, companies or institutions. The borrowers are businesses who can borrow for any business purpose. The minimum loan size is GBP 100k and the duration of the loan can be up to three years. This is a straightforward concept the only deviation from the normal for a lender is that the loan is insured and secured.

The Engine

Insured and secured P2P loan, this is the engine of ArchOver. The prospective loan is secured against realisable assets such as accounts receivables. This asset is then protected via credit insurance. Their insurance partner is Coface. SMEs seeking a loan has to maintain 125% minimum secured asset values. In addition, to insurance ArchOver conducts its own due-diligence.

Revenue is generated via the standard spread based practice. There are no fees levied to the lender.

ArchOver is supported by the Hampden Group, leading provider of financial and business support services.

The engine relies on a core group of lenders who are part of every loan. So far, ArchOver has funded circa GBP 17 million in loans with an average return of 7.18%.

The Intrinsic Value

ArchOver changes two specific things in the old world and in the new P2P lending space.

In the old lending model, it does what every other P2P provider does, provides businesses access to loans and gives lenders an opportunity for better returns versus the yield for idle cash at a bank.

If you visit any P2P lenders site it says ‘Capital at Risk’. In ArchOver’s case this is true as well but it brings a nuanced approach to risk. Their model insures and secures the assets via an insurance provider. Other than insuring ArchOver also registers an all-asset debentures charges at Companies House on all the company’s assets with the accounts receivable in case of default.

The value ArchOver adds to the process is simple: it adds layers of security and barring unforeseeable scenarios this is a pretty robust model.

The Profitability Conundrum

With circa GBP 17 million lent and with borrowing rates starting at 7% and investors earning between 5-9%, with a loan pipeline of GBP 20 million and growing, profitability should not be an issue once the business is established. In addition, inclusion of ISA and SIPP will also start to play a role.

The Verdict

ArchOver has facilitated a fraction of loans compared to some of the other P2P lenders and industry in general but it has innovated within the existing innovation and disruption. The concept is here to stay and can be replicated but ArchOver has the lead and the advantage with no missed payments, and no actual losses.

We have all seen discussions about P2P lending and the risks involved. ArchOver can successfully weather any storm or bubble that may come its way.

Word-of-mouth and referral can take you far but if you have the capacity to lend GBP 50 million, a few advertising campaigns will certainly capture UK SME crowd and perhaps the Crowd-lenders too. The growth is likely to come when ArchOver decides to pivot and encompass segments that are not currently in its target market. Has the robust model found the bull’s eye and ready to expand?

Founder comments

Angus Dent, CEO, ArchOver:

The ArchOver business model has been designed with the security of its lenders very much at the forefront. Our due diligence procedures are both thorough and robust. We are supported in this process by Coface, one of the largest credit insurers in the world, and it is through their policies that our lenders are protected against possible default. We know of no other lender that safeguards its clients in this way.

The ArchOver proposition, which has differentiated us from our competitors, continues to attract a growing number of loyal lenders which includes private individuals, family offices and small institutions. We have a 100% record in raising money for our creditworthy borrowers who frequently come back to ArchOver when they are looking for further finance.

Disclaimer: This material is for informational purposes only and should not be construed as research or as investment advice, nor should it be considered information sufficient upon which to base an investment decision.  Further, this communication should not be deemed as a recommendation to invest or not to invest.

The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete in its accuracy and cannot be guaranteed.