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What Does “Hard” Mean When Saying Hard Money?

While the world of commercial finance is vast and complex, the basic approach to borrowing money is amazingly simple. When financing a large project, you must either borrow money from a traditional financial institution or seek out a hard money lender. While traditional loans are more familiar, there are several aspects of hard money you should consider.


Money is money, so the source ultimately matters little when it comes down to actually financing the project. However, hard money can often come with strings attached and it is important to fully understand any commitments you are making.


Hard money loans are not offered by standard banks and credit unions. These are essentially loans that are made by private groups, either a singular investor or a group of like-minded individuals. Their criteria for approving your loan and the conditions required of you will vary greatly depending on who you are working with.


Hard money lenders are not bound by the standard criteria and guidelines that cover traditional institutions. As a result, they are more likely to make a decision on a loan in a shorter period of time. Each lender has their own criteria for what makes a good risk, including recent history and specific notes on your credit. The nature of the collateral you bring to them may also influence their decision significantly and they will use independent criteria for determining its worth.

Interest Rate

The nature of hard money lending is riskier than the process adopted by standard institutions. Private investors face a greater chance of not seeing a return on their investment and they offset this risk by charging higher interest. While the competition between standard lenders keeps their rates around prime, private rates are likely to be higher. It’s important to gauge whether the increase is worth it for your particular need.


Hard money loans are generally short-term, often lasting no more than a few years. Lenders are keen to see a return on their investment and do not have the long-term goals that standard institutions share. As such, hard money loans are ideal for short projects but are not suitable for a situation that will take years to see significant gains.

All in all, hard money loans provide an alternative to standard financing that can be valuable in the right situations but cannot be used to avoid a mortgage in the long run.

Shop Commercial Mortgage is a pool of Hedge Financial Investors, Private Capital Investors and other lending professionals that specialize in solving your lending needs. If you are interested in learning more about commercial financing options, we invite you to contact us for a free quote and consultation at 813-516-5210.

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"I just closed a commercial loan in St. Petersburg. A 16 unit apartment complex for $100,000 at 11.5% interest. It was a free and clear equity driven low documentation refi with no appraisal so it closed fast!"

Mikle / Broker


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