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.