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ArchOver has developed the first "secured and insured" Peer-to-Peer business lending platform, that aims to minimise lender losses - as well as avoiding the need for personal guarantees from borrowers, which is often disliked by company directors/owners.

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How to earn 5% pa without betting on the stock market

Published: 22nd September 2016
The UK P2P finance sector is in fine fettle. According to research experts BI Intelligence, consumer/business lending is set to jump 87% in 2016 to £4.5bn, and more than triple over the next 5 years to £15.9bn by 2020. The sector saves everyone a great deal of money; not least by cutting out expensive middlemen (eg banks, invoice financiers), implementing next generation credit checking software and automating cumbersome back-office functions.

ArchOver is the pioneer of 'secured and insured' loans to financially viable SMEs (small, medium sized enterprises). It launched in 2014 and is now part of the Hampden Group (90% controlled) - itself a substantial privately owned financial services firm (£64.5m net assets as at 31/12/14) operating the largest Members' Agency at Lloyds Insurers. In 2015, originations hit a record £10m and are predicted by CEO Angus Dent to climb another 90% in 2016 to £19m, supported by £12m of bookings Sept'YTD.

Crucially too for fixed income investors, there have been no defaults or late payments to date on any of its >110 loans (average size £250k) across 20+ different SMEs, funded by >200 lenders, who have earned on average >6% pa. This is much better than most of its peers and reflects not only management's rigorous credit vetting procedures (max 80% LTV) where all loans are secured against a borrower's debtors' book and monitored continuously throughout the term, but also that in every instance the collateral is independently insured by Coface, a €800m+ mrkcap organisation listed in Paris (COFA.PA): hence providing a triple layer of protection. 

We estimate lenders should be able to pocket a yield of 5% pa over the economic cycle from owning a diverse portfolio of ArchOver's SME loans - whilst also suffering less volatility than typically derived from equities, gold or real estate.

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How to make a 'relatively safe' 5% pa return

Published: 17th April 2016

ArchOver operates (what is believed to be) the world's only "secured and insured" Peer-to-Peer (P2P) lending platform, which aims to minimise losses - as well as avoiding the need for personal guarantees, which is often disliked by company directors/owners.

If you are looking for a decent, yet none too risky, return on your hard earned cash then it's almost impossible to find nowadays. However, there may now be a solution - investing in P2P loans either directly through an online platform, or via the government's newly created tax efficient 'Innovative Finance ISAs'. There is plenty of choice, too, ranging from volume players like Zopa, RateSetter, Funding Circle, and MarketInvoice, to the niche providers, such as ArchOver.

The beauty of P2P is that its cost base is circa 2x-3x lower than the traditional banks. So, by cutting out the middleman, lenders and borrowers alike are both able to enjoy superior terms. In fact, we reckon that going forward, across the economic cycle, a diversified portfolio of P2P loans should be able to generate 'relatively predictable' returns of circa 5% pa (net of costs/defaults).

ArchOver not only completes extensive due diligence before any money is released, but also its loans are 'secured' (with an 'all-asset debenture' charge held at Companies House) over the borrower's Accounts Receivable balance, with the collateral being further 'insured' by Coface, a €1bn+ market cap business (COFA.PA) listed in Paris. This insurance layer acts as both a robust 3rd party, independent validation, and an extra level of reassurance for lenders.

To us, ArchOver's differentiated business model is best of breed, and perhaps even represents the future of corporate lending to SMEs worldwide.
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