Hard Money Loans

Hard money loans provide short-term, asset-based financing for real estate investors and business owners who need speed, flexibility, or alternative underwriting solutions.

What Is a Hard Money Loan?

A hard money loan is a short-term real estate loan secured primarily by the value of a property rather than the borrower’s income or credit profile. These loans are commonly used when traditional or conventional financing is not available, practical, or fast enough to meet a transaction’s timeline.

Hard money loans are typically funded by private lenders and are designed for time-sensitive, high-opportunity, or non-traditional real estate scenarios. They are most often used as temporary financing with a clearly defined exit strategy.

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How Hard Money Loans Work

Hard money loans focus on the asset first, not the borrower’s long-term financial documentation.

Key characteristics include:

  • Short loan terms, often 6 to 24 months

  • Asset-based underwriting centered on property value

  • Faster approval and funding timelines

  • Higher interest rates compared to traditional loans

  • Flexible qualification standards

Because speed and flexibility are prioritized, hard money loans are commonly used in competitive or distressed situations.

Common Uses for Hard Money Loans

Hard money loans are well-suited for scenarios where timing or property condition prevents conventional financing.

Fix-and-Flip Properties

Funding the purchase and renovation of properties intended for resale.

Distressed or Non-Stabilized Assets

Properties that do not qualify for traditional financing due to condition, occupancy, or cash flow.

Auction and Off-Market Purchases

Quick-close opportunities where conventional lenders cannot meet deadlines.

Bridge-to-Permanent Financing

Temporary financing used while preparing to refinance into a DSCR loan or traditional commercial loan.

Property Types That May Qualify

Hard money loans can be used for a wide range of real estate assets, including:

  • Single-family and small multifamily properties

  • Commercial buildings

  • Mixed-use properties

  • Land in select cases

  • Transitional or value-add properties

Eligibility depends on property condition, location, and exit strategy.

Qualification Requirements for Hard Money Loans

While underwriting is more flexible than traditional loans, lenders still evaluate key factors.

Common requirements include:

  • Property value and marketability

  • Loan-to-value (LTV) ratios based on purchase price or as-is value

  • Equity or down payment, often 20–35%

  • Exit strategy, such as resale or refinance

  • Borrower experience, depending on project complexity

Credit scores and income documentation may be reviewed, but they are typically not the primary approval drivers.

Loan Terms and Structure

Hard money loan terms vary by lender and project but often include:

  • Loan terms from 6 to 24 months

  • Interest-only payments in many programs

  • Origination fees and closing costs

  • Fixed or variable interest rates

  • Extension options in some cases

These loans are designed for short-term execution, not long-term holding.

The Importance of an Exit Strategy

A clear exit strategy is essential for any hard money loan.

Common exit strategies include:

  • Selling the property after renovation

  • Refinancing into a DSCR loan

  • Refinancing into a traditional commercial loan

  • Paying off the loan through business proceeds

Lenders evaluate exit strategies carefully to ensure the loan can be repaid within the agreed timeframe.

Hard Money Loans vs Other Financing Options

Hard money loans serve a distinct role within the commercial financing ecosystem.

  • Hard Money Loans – Asset-based, short-term, speed-focused financing

  • Bridge Loans – Short-term financing for transitional but less distressed properties

  • DSCR Loans – Long-term financing based on stabilized rental income

  • Traditional Commercial Loans – Permanent financing with full underwriting

Choosing the right loan depends on urgency, property condition, and long-term objectives.

Benefits of Hard Money Loans

  • Faster approvals and funding

  • Flexible underwriting for complex scenarios

  • Ability to act quickly on investment opportunities

  • Financing for properties that do not qualify for traditional loans

When used correctly, hard money loans can unlock opportunities that would otherwise be unavailable.

Risks and Considerations

Hard money loans also come with important considerations:

  • Higher interest rates and fees

  • Short repayment timelines

  • Dependence on a successful exit strategy

  • Increased cost if projects are delayed

These loans are most effective when paired with realistic timelines and conservative planning.

Frequently Asked Questions About Hard Money Loans

Are hard money loans long-term loans?

No. Hard money loans are short-term and designed to be replaced by permanent financing or property sale.

Do hard money loans require good credit?

Credit may be reviewed, but property value and exit strategy are more important.

Are hard money loans only for investors?

They are most commonly used by investors, but business owners may qualify in certain cases.

How fast can hard money loans close?

Timelines vary, but hard money loans generally close faster than traditional financing.

Explore Hard Money Loan Options

If you need short-term, asset-based financing for a time-sensitive or non-traditional real estate transaction, a hard money loan may be the right solution.

Speaking with a commercial loan specialist can help determine whether hard money financing aligns with your property, timeline, and exit strategy.

Questions Call (888)214-5151