ArchOver Takes Steps to Conjure Up Liquidity

That's quite a statement. What are you basing it on?

Hi elljay,



You’re right; it certainly is a bold claim for us to make and let me explain why we make it…



We strongly believe in the efficacy of our ‘Secured and Insured’ model and consider it to offer a superior level of protection to any other P2P model that we know of. It works as follows:

ArchOver on behalf of our Lenders registers a First Floating Charge over the Accounts Receivable (AR’s). Once the loan has been drawn down the Borrower must maintain the Accounts Receivable (AR) at no less than 125% for the duration of the loan. In the unlikely event that a Borrower’s ARs drops below 125% or they default on a payment, our Lenders have first access to the Accounts Receivable (near cash asset) in order to recoup the value of the loan outstanding.



We monitor the ARs monthly. We are able to spot any downturn in business quickly. We simply don’t believe that it is right to wait for a missed payments like other Crowdlenders to alert that something is wrong.



On top of this the Borrower is required to take out an Insurance policy over their ARs. The purpose of this is twofold: on the one hand, it further mitigates Lenders’ risk by safeguarding the integrity of the ARs against non-payment (a primary reason for business defaults) and on the other hand a second round of due diligence is carried out by the insurance company on the Borrower and their clients – nobody else in P2P does this level of due diligence. All the insurance companies we use are AA plus rated – more details can be found on our website under insurance.



We also meet face to face all Borrowers, visit their premises and review all up to date business documentation. We do not rely on out of date and often of minimal use (SME reporting is very light) company house info like most Crowdlenders do with Experian etc.



I hope that helps validate Angus’s claims. Let me know if you would like to know more.





shimself,



As you point out there was a brief period last week during which there were no loans on our platform. As I’m sure you can appreciate this is something we try to avoid, and as we continue to grow larger this should happen less often. There are now new projects live on the platform and we have a pipeline of over £10 million as of today.

Hi shimself



What happens if you don't get sufficient pledges?

If we don’t get enough pledges it will fail to fund and all monies are returned at our cost to investors.



Is there a q&a on the site so one can elucidate things on a given project?

At the moment no, though we do plan to offer a q&a section early next year but it will not be an open forum for discussion. Also at the bottom of every screen on the secure site you will find a (?) - this has been introduced and is the first step to providing deep help for our investors. Please feel free to ask us anything in-platform, we will be only too happy to respond.




What is consign stock exactly, and how is it controlled?

This is stock that has been made and supplied to a major customer and is stored at their warehouse. The customer can then be safe in the knowledge they can rapidly fulfil orders further up the chain. This is quite common in markets like health care when there are very large suppliers servicing the NHS.



The stock is still owned by our Borrower and is fully insured against loss. We have an overriding interest over all their stock as security for our investors.





Let's pretend that one of your companies struggles, inventory andor receivables fall a bit or a lot below the threshold. Can you explain what happens please?

We always build in a larger buffer – in the case of this example there is significant stock and a very active debtors book that is often paid in very short order assisting cash flow at the company. However we do monitor this month on month and if there is a breach then we will call in the loan and liquidate the stock and the outstanding invoices.



Or let's take a scenario, the big customer sends a whole lot of stuff back. All of a sudden the receivables drops and inventory goes up a bit. The company is suddenly essentially skint. (This actually happened at FK recently) Are lenders covered? Wouldn't the insurer try to wriggle out of it?

The stock always has value, we have assumed cost minus 50% which still leaves a good buffer against the LV. The stock is also a range of items rather than one product so would be easy to liquidate to a third party. The end customer is also the NHS so volatility in demand is usually very predictable – we are not talking about a drug that might suddenly be removed because of a health scare.



The accounts receivables are separate to stock but of course the amount of consigned stock sold in any given month to that large client converts into the AR. The AR is made up from a number of clients not just this one and of course we are monitoring it monthly - if things do go south we can quickly grab the AR’s, cash paid on account against the ARs and the stock



The insurance only kicks in when there is a default or very late payment on an AR. In the scenario you paint above we would probably grab the ARs and sell them at a discount to an insurance partner to collect with their back office teams thereby freeing cash back to investors quickly.





Are you connected with the insurer E**-H**?

There is a full list of insurers on the website that supply Credit Insurance. We are not connected with any of them and do not have any direct relationships. All insurance is undertaken directly by the Borrower or we introduce the Borrower to one of two approved brokers to assist them. The loss payee is always the investor via ArchOver clients accounts



www.archover.com/insurance/



Are there no PGs? Why not?

We have two answers to that



1. PGs are in reality extremely difficult to collect on. For example Judges are extremely reluctant to turf a family out of their home even if the wife is a joint signature. But there is also a whole industry dedicated to getting individuals out of their PG obligations and it can be a long and costly exercise pursuing a PG - that’s on the assumption the PG was drawn up correctly in the first place. If a PG is called there is usually a load of other personal debt in the mix and the individual might declare bankruptcy to further complicate things.



Note also: in most cases the creditor is a bank, and that currently the banks do not wish give the courts the opportunity to strike down a personal guarantee, as to do so would set a dangerous precedent potentially affecting thousands of guarantees held by them (and other lenders). As a result, when confronted with a well advised guarantor, the banks' firm rejections can give way to a willingness to settle, meaning less money back against a PG.



This means that in our opinion PGs create a false security to an investor.



2. We only deal with well-run businesses and A+ rated loans, that are fully insured and secured and always have a buffer of security that covers the loan amount comfortably and is ‘near cash’. There is no need for PGs even if they had any teeth.



I'd prefer to see more detailed figures than sales and NPBT (or is it NPAT?), am I missing something? A credit report wouldn't go amiss either.

We do extensive face to face and premises DD. The insurance company also carry out DD. The insurance homogenises the risk of each loan so that all loans in theory carry the same risk level (near to zero as we can get it) meanwhile the security and first charges over ARs etc. remove the need for our investors to have to do too much DD themselves.



External credit reports have little value as the data is often out of date (up to 18 mths) plus the SME market is poorly served anyway.



It's a shame the details from the completed loans are limited.

We are looking at that

Steerpike

The payments schedule on the website for this is not reflective of the actual payments on this project, which are all being made correctly.

We are aware of the problem and the technical team will be attending to this soon.

Thank you

Hi shimself.

It’s a very fair point and one we are looking to sort out. Thank you for making your comment and a very Happy Christmas by the way.