ArchOver advises lenders to look at borrowers’ debt books

ArchOver has urged other lenders to look at the debt books of prospective borrowers as a source of lending security.

The peer-to-peer business lending platform said that it already looks at debtor books as a way to analyse potential recovery rates.

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“Lenders have looked to trade debtors as a key source of security for generations – and for good reason,” ArchOver said in a blog on its website.

“Aside from cash, the debtor book is almost always the most liquid asset on the balance sheet. In an event of default, it provides a lender with a relatively straightforward route to recouping its capital.”

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ArchOver also looks at the management teams when analysing lending propositions.

The platform said an indication that other parts of the business have been poorly managed is if the management team has allowed its debtor collection process to slip.

Poor or defective goods or services can also raise concerns about management, their control of the business and collecting the security, ArchOver added.

However, the platform said that late payment is viewed differently as this is a problem that harms small- and medium-sized enterprises through no direct fault of their management.

It also causes problems for lenders too, impacting borrowers’ cashflow and their ability to make scheduled payments.

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The platform said the pandemic will worsen the problem and a willingness to engage with services shows that a management team is proactive in identifying problems.

“As a lender, that’s the kind of clear headedness we like to see,” the blog post concluded.