In an independent report conducted by Equity Development, peer to peer lender ArchOver has received a nice affirmation of their secured lending approach. The publication entitled, “How to Make a Relatively Safe 5% PA Return” (registration required), labeled their business model as perhaps the best practice in the peer to peer / crowdlending sector. The report stated;
“To us, ArchOver’s differentiated business model is best of breed, and perhaps even represents the future of corporate lending to SMEs worldwide.”
Analyst Paul Hill states in the document that credit vetting procedures are at least on par with the high street banks and expects that going forward, across the economic cycle, a diversified portfolio of peer to peer loans should be able to generate ‘relatively predictable’ returns of circa 5% per annum (net of costs and defaults). Hill takes a moment to disagree with the broadside criticism of Lord Adair Turner who blasted the entire peer to peer lending industry recently.
The report records that ArchOver has arranged 81 loans collectively worth £15.2 million without any late payments to date. In terms of credit quality, the analyst believes that ArchOver’s loans lie broadly in the band between S&P’s lower investment grade (BBB) and upper high yield (BB-) ratings.
“It’s always gratifying when an independent source says positive things not just about your organisation, but also about the sector in which it operates. There are a lot of players in the P2P sector and, in the fullness of time, we will all have to face more difficult times which will result in casualties and some inevitable industry consolidation. However, in the meantime, creditworthy SMEs are gaining access to the funding they require and lenders are earning a decent return on their money.”
The report concludes that the peer to peer lending industry holds an attractive future. The author is of the opinion that ArhcOver’s “secured and insured” process is a “powerful differentiator.”