Failure Analysis
Amigo died from a toxic combination of regulatory failure, business model rot, and a founder-CEO who fought regulators instead of adapting. The mechanical cause...
Amigo Loans \UK
Amigo Loans pioneered the guarantor loan model in the UK, targeting subprime borrowers who couldn't access traditional credit. The psychological hook was powerful: it transformed credit rejection into a social opportunity. Instead of being denied, borrowers could involve a trusted friend or family member as a guarantor, turning financial exclusion into a story of trust and support. For guarantors, it offered a way to help loved ones while earning goodwill. The company positioned itself as a bridge for the 'credit invisible'—people with thin files or past mistakes who were locked out of mainstream finance. At its peak, Amigo processed over £1 billion in loans annually, went public on the London Stock Exchange, and was valued at over £1 billion. The model seemed bulletproof: higher interest rates compensated for risk, and the guarantor structure provided a safety net that traditional lenders lacked.
Discover the reason behind the shutdown and the market before & today
Market Analysis
The UK subprime lending market has undergone radical transformation since Amigo's collapse. Traditional guarantor loans are effectively extinct—no major lender offers them post-FCA crackdown....
Startup Learnings
Guarantor-based risk transfer is a social toxin masquerading as financial innovation. Amigo's model didn't reduce risk—it shifted it from the lender to the borrower's...
Market Potential
The underlying market—credit access for subprime borrowers—remains massive. In the UK alone, 10+ million adults have subprime credit scores, and the FCA estimates 12.9...
Difficulty
Rebuilding this model today requires navigating a dramatically more hostile regulatory environment post-FCA crackdown, plus solving the core problem that guarantor loans inherently create:...
Scalability
The guarantor loan model has fundamental scalability constraints that became fatal. Each loan required manual underwriting of two parties (borrower and guarantor), creating operational...
Rebuild & monetization strategy: Resurrect the company
Execution Plan
Phase 2
Launch a waitlist targeting London-based Uber drivers via hyper-local Facebook ads in driver groups and partnerships with driver centers. Offer the first 100 users a £50 advance with zero fees to gather behavioral data and testimonials.
Phase 3
Develop underwriting logic that analyzes 90 days of gig earnings to calculate safe advance amounts (max 40% of projected monthly income) and repayment rates (10-20% of each gig payment). Build in automatic pauses if income drops below thresholds.
Phase 4
Run a 3-month pilot with 500 users, tracking default rates, customer satisfaction, and unit economics. Target metric: <2% default rate and >60% repeat usage within 90 days. Use this data to secure FCA regulatory approval as a credit broker (not a lender initially—partner with a licensed lender for capital).
Monetization Strategy
Charge a flat 8-12% fee per advance (e.g., £100 advance costs £8-12), equivalent to 25-35% APR but presented as a transparent one-time fee. Revenue model: 70% from advance fees, 20% from premium subscriptions (£5/month for instant advances and higher limits), 10% from B2B partnerships where employers subsidize fees as a retention tool. Unit economics: Average advance of £150, 10% fee = £15 revenue, CAC of £25 (via referrals and partnerships), 60% repeat usage within 90 days = LTV of £90+ over 12 months. Target 40% gross margins after capital costs (partner with a licensed lender who provides capital at 8-10% cost). Path to profitability: 50,000 active users generating £6M annual revenue with £2.4M gross profit, achievable within 24 months in the UK gig worker market alone.
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