Throwing huge sums of money at a new or particular market in order to achieve dominance is nothing new. The corporate landscape is littered with the financial corpses of over-zealous entrepreneurs who hurtled down the growth path without sparing a thought for the day of reckoning when someone – usually one of the backers – pauses to ask when all this investment is going to result in a profit. The ‘jam tomorrow’ argument eventually wears thin.
Some commentators are already starting to pose the question in relation to the long term future of Alternative Finance providers, including P2P business lenders like ArchOver. It is a fair question since it is no secret that the largest players in the sector – companies like Funding Circle, Ratesetter and Zopa – have all posted bumper losses as if there was some kind competition running to see which of them could lose the most money fastest. The observation that the vast majority of Altfi operators have never been through an economic recession is equally true. Eventually, the music has to stop and there will be some casualties, at which point the pundits will doubtless have a field day.
In the meantime, it is not for us to question the wisdom of others in our sector – we can only speak on our own account. The dash for growth at the expense of profitability or, more importantly, quality has not been the ArchOver way because there has been no need to adopt such a strategy. We are not under pressure from voracious venture capitalists who simply want their money back plus a massive return for their trouble. ArchOver is backed by a 300 year-old institution with a proud reputation to maintain – something infinitely more precious than making a fast buck.
ArchOver’s approach to the vital due diligence processes, backed by the ‘Secured and Insured’ model, not only works, but has been seen to work. £25m of loans facilitated over two years with no losses and no arrears is a considerable achievement. Whether individuals, family offices or small institutions, all of our lenders have been treated equally and have received exactly what they were told to expect at the outset.
On the flip side, borrowers over the ArchOver platform have been treated fairly, with no nasty surprises in terms of hidden fees or charges. The fact that many have returned to seek more finance is testimony to the appeal of our business model and the way in which they have been treated by the team.