The phrase “skin in the game” is commonly used in the corporate finance industry and refers to when owners or principals of an investment vehicle maintain an equity stake in circumstances where outside investors are seeking to invest. This is to ensure the interests of the originator of the asset are aligned with the interests of the investor, as both sides have a stake in the investment.
On Mintos, skin in the game follows a concept that differs slightly depending on the type of investment:
Investments in Notes, financial instruments backed by loans
All lending companies that issue underlying loans for the Sets of Notes placed on the platform are required to keep a certain percentage not assigned to the Note Issuer, which is the lending company's stake in the loan. For example, if a lending company with 10% skin in the game issues a €1 000 loan to a borrower and then this loan serves as the underlying loan for a Set of Notes, only €900 of this loan will be available as a part of the Set of Notes for investors to invest in and the lending company will keep a stake of €100.
Investments in loans by means of assignment agreements
All lending companies that place loans on the platform are required to keep a certain percentage of each loan, which is their stake in the loan. For example, if a lending company with 10% skin in the game issues a €1 000 loan to a borrower and then places this loan on Mintos, only €900 of this loan will be available for investors to invest in and the lending company will keep a stake of €100.