“Skin in the game” refers to the portion of the loan still held by the lender. PeerStreet lenders use their capital to originate loans before offering them to PeerStreet. In some cases, they may continue to retain an ongoing economic interest in the deal. By keeping lenders involved in the loan financially, it better aligns your interests with theirs.
While PeerStreet encourages lenders to keep skin in the game, there are a few reasons why a lender may not, including:
- Demand for loans: Loans with specific characteristics receive a lot of demand from PeerStreet investors. We want to make as much of the loan available as possible so, in those instances, we may ask the lenders not to retain a portion of that loan.
- Lender capital constraints: Lenders occasionally need to free up more capital so they can make more loans, and therefore they cannot retain a portion of the investments offered on PeerStreet.
- The lender has an established relationship with PeerStreet: When we first onboard lenders, we very often require the lender to retain an ongoing interest in loans until a track record is established with us.
Note Purchase Rate
A spread or fee may be earned by the originator or a third party for a variety of reasons, including, without limitation, if the initial risk to that investment has been mitigated in some manner, if a third party is providing services associated with the loan, if a third party has skin in the game in the loan, etc.