If he wants then he can do a one time deal with an escrow provider too. Like escrow few thousand USD. Depending on the monthly or weekly volume he is trading with his borrowers. It's hard to calculate unless he runs the business for at least a few months to get a rough number.

But as you suggested, it's much easier when borrower send the collateral to the escrow and lender send the money to the borrowers. When borrowers pay back then escrow send back the collateral to the borrowers.