“Skin in the game” refers to the amount of the borrower’s money that is tied up in the project and any other equity contributed to the project by parties other than the borrower.
Real estate developers who have a significant amount of their own money tied up in a project, especially relative to the amount they are borrowing, are less likely to default. Thus, the more skin in the game a borrower has in a project relative to the amount they are borrowing, the lower the risk of the project. A borrower’s skin in the game is assessed on a 10-point scale. The higher the ratio of the borrower’s skin in the game, the higher the score and thus more points earned towards the raw score.
In some circumstances, we may permit a portion of the proceeds from the loan to be used by the borrower to offset a portion of the purchase price of the property, works completed, or equity, but such offset will then reduce its amount of skin in the game the borrower would have in the project.
Please note that under no circumstances will our loan exceed the total project costs for a project as set forth in the applicable Project Summary.
What does "Skin in the Game" mean?
Written by Josh
Updated over a year ago