When it comes to social lending, I thought I had a pretty good idea of where I thought the industry could go and some of the other niches that social lending companies could service. Last week that changed when I heard about Red Rock Assets. It seems like there is no lack of innovation when it comes to disrupting industries. Red Rock Assets has an interesting twist on social lending. For one, it offers only mining projects through its platform. Not only do lenders earn interest, but there is also a profit sharing aspect, which is a unique concept. Intrigued? I was, and that’s why I was anxious to talk with Matthew Freedman - CEO of Red Rock Assets - to learn more.
As mentioned above, Red Rocks Assets will offer projects specific to mining. These projects are of the type that have historically been funded solely by banks and other institutions until now. According to Red Rock Assets, junior mining companies are having difficulty financing projects. Coupled with the increased demand for mined commodities, financing these projects will be extremely important.
A prospectus for the general public is currently under consideration, which means that only accredited investors will be able to invest when the platform kicks off in May 2014. Unfortunately, as much as I would like to invest a small amount of money and document the progress on the blog, it will have to wait. You can view the definition of an accredited investor on their site here.
Like others in the social lending space, Red Rock Assets aims to give lenders the opportunity to receive better interest rates than you would receive from banks. One aspect that makes Red Rock Assets unique is that the loans are not unsecured loans like those with Lending Club and Prosper. On behalf of its lending members Red Rock Assets holds security charges over the assets (mining equipment, property, etc.) of all mining projects funded through its platform. In order for a project to receive funding, there must be a loan coverage of 350%. In other words, this means that assets backed by the loan must equate to 3.5 times the value of the loan. Matthew noted that while each project is different, 350% could be on the low end of some projects.
The amount of funding for the initial projects will range from $5M to $25M, although as the platform grows Red Rock Assets could eventually present projects seeking as much as $100M to its lending members. At launch, the projects are estimated to seek $80M in funding, with 4-7 different projects from a variety of geographical locations constituting the first offering. Additionally, Red Rock Assets will not limits these early projects to any particular type of mineral. The key for them is that each project meets their criteria.
Accredited investors will be able to invest in increments of $5000 and can spread their investment across multiple projects. Promissory notes will start at 7.5% annual interest. In addition to that, investors will earn a profit share forecasted to be an additional 7.5% upon the commercial production of the mining project. The way these notes will work is a little different from a traditional Lending Club or Prosper note. They will have an expire date which can be many years in the future, but the anticipated pay off could be 3 or 5 years depending on the project. The profit share payout will however last until the expire date.
Red Rock Assets has partnered with Key Capital Corporation (OTC: KCPC) to originate and vet the first mining projects. Red Rock Assets will provide lender authentication, identity and bank account verification, interest collection and payment. You can view the press release here.
If you have any comments, please feel free to leave them in the comments section. Additionally, Matthew has agreed to respond to any questions you may have about Red Rock Assets.
You can learn more about Red Rock Assets on their website: