Summary: Archover are a lesser known P2P investment platform, but having operated since 2014, one of the more established. It focuses entirely on business loans, with sub-divisions based on the loan purpose at a variable interest rate of approximately 6% and 10%. This has not seemed a great deal in comparison with other platforms such as Funding Circle, but with the latter’s performance in question in recent times it may make sense to take a closer look at alternatives such as Archover. The main product is not for the average Joe though, with a minimum of £1,000 required per individual loan although diversified portfolios have a minimum of £250.
I have no current position in Archover, so unable to comment on a current real investor XIRR, but here is how it would compare with other platforms I am invested in which concentrate on business loans:
|Platform||Link||Target Rate (%)||My XIRR (%)||Status||Live Rating|
|Review||Up to 15%||8.78%||OPEN||4/5|
|Review||Up to 7%||5.68%||OPEN||2.5/5|
|Review||Up to 5.3%||TBC||OPEN||3/5|
|Review||Up to 16%||8.0%||OPEN||3/5|
What is Archover?
Archover was formed in 2014 with a name perhaps inspired by their business offering and partly by their offices at the time. They provide businesses with finance secured in a different type of way from others: there was the possibility to secure a loan based on outstanding invoices or assets generating revenues. This type of invoice financing was already in existence, but Archover’s offerings allowed this to be financed by the crowd rather than a bank.
Typically, the interest rate on these types of loans has been much bigger, as a business in need of cash is potentially closer to failure than a business which can finance itself. As we can see from some of the old ‘E’ rated loans on Funding Circle which paid close to 20% in interest, some of these were close to junk status and a large proportion would end up in difficulties. (A cynic might add that many loans in all Funding Circle categories can be described this way).
Interest rates for loans at Archover are much lower, reflecting the fact that much greater due diligence in placed on loans. This has led to five different classification models (Secured, Secured and Insured, Secured and Assigned, Bespoke, Research) and all but Research loans have some asset-backing to them.
Here is a table showing Archover’s features:
|Investment Type||Business asset/invoice/research|
|Minimum Investment||£1000 (£250 for plans)|
|Auto Invest?||Yes (only on plan)|
|Available in ISA?||Yes|
|Active on forum?||No|
Archover Operating Model
The process of getting invested at Archover is similar to that of many platforms: sign up and add money to your account: this can be done via bank transfer or direct debit.
Once the money is in your account you can browse the range of opportunities available. Archover package a decent range of information with each investment, with detailed information about the company, what the funds will be used for, the key people at the company and a summarised version of the accounts (you can have more information if you Google). This beats down other platforms such as Funding Circle, although arguably with the minimum £1,000 investment barrier here, you would want the ability to research companies in depth.
There are a variety of investment types here, which feature different repayment methods, rates and types of security as described above. A typical loan will pay interest only at monthly periods with the balance becoming due at the end of the period. Unlike companies such as Growth Street, the loans at Archover tend to be for longer periods (although loans come from as little as 3 months), and given that there is currently not a secondary market, you should be prepared to hold the loan until maturity: there is no other option.
For those short of a little time, Archover also offer Investment Plans which automatically diversify the investment, and pay a fixed amount of interest of 7.4% for 26 months. An added advantage of this is that the minimum investment drops sharply to £250, and therefore make this accessible to every user. The downside is that the Plan is not open-ended, and only a certain amount becomes available for subscription: once it is gone, you have to wait for another opportunity.
In some ways this is preferable to the black-box style of other platforms such as the attempts seen by Lendy or Funding Secure (now both out of existence), and we can have greater certainty that funds pledged will actually be used for loans.
How are funds protected?
Most importantly, Archover is not covered by the Financial Services Compensation Scheme (FSCS), although no similar platforms are. In the event of a loss, we are therefore not guaranteed to receive money back and are reliant either on the platform to perform well on our behalf or in the event of platform failure, the back-up procedures to kick in and be competent.
The loans on Archover have varying amount of protection for investor funds. Some loans benefit from insurance against accounts receivable, which in theory pays out if the revenue stream cannot. Other loans have security in the form of a charge over assets, either fixed on a specific asset or a floating charge against the business as a whole. Bespoke loans may only benefit from much weaker security pledges such as a second charge on property, or a charge against a tax advance.
Pros of Archover
There are many things to like about Archover.
Quality of opportunities: There are less opportunities here than on Funding Circle, reflecting the higher quality desired by the platform. The loans appear transparent and sufficient information is given to allow you to make a decision.
Range of securities: We like that loans have been split into differing levels of securities, which are able to be self-selected according to risk tolerance.
Interest Rates: Whilst not touching the higher interest rates in the industry, rates of between 8-15% for business loans allow a premium for the additional risk taken.
Auto-Invest allows smaller investments: The Investment Plan minimum investment is £250, which allows many investors to take part.
Cons of Archover
There are also a few things to dislike here:
High minimum limits: The minimum investment for a self-select loan is £1,000, which will be too steep for many smaller investors.
Low diversification: Opportunities are slow to come to market, and there is no possibility to buy in a secondary market, thus the pace of diversification is slow.
Statistics not obvious: It is not quite clear from the website how defaults have affected returns. Default rates appear low, but the effect on a portfolio may be significant due to the lack of diversification.
Low liquidity: The lack of secondary market means it is not possible to sell investments to other users, making this a longer-term investment even for those in the Investment Plans.
Archover are a mature P2P platform that offer a smaller range of business loans, although at a higher level of purported monitoring. Many loans are secured and insured and their track record appears good albeit from a limited dataset. However, a high level of minimum investment may deter newcomers as well as the inability to trade out of investments early.
Disclaimer: This article represents my own opinions and should not be substituted for investment advice. Please research before you invest with any firm. Typically P2P investments are not covered by the Financial Services Compensation Scheme (FSCS) in the way bank deposits are, and there are no guarantees that you will receive the returns advertised (or even a return at all).