Hard Money Business Loans: Top Options for 2021

Insights Into Hard Money Business Loans

Hard money loans are business loans that are not solely based on the applicant's creditworthiness. Typically, businesses will select this type of financing as a last resort when traditional loans are unattainable or too costly due to bad credit or a high loan-to-value ratio. 

Traditionally, banks do not offer this funding type because it is not regulated by the Federal Reserve, making these transactions risky. Nevertheless, hard money loans are a great option for businesses dealing with emergencies or those looking for swift processing times and fair interest rates. 

The Top Hard Money Lenders for Business

Our experts have researched and compiled a table of the top hard money lenders.   

What is a Hard Money Business Loan?

A hard money loan is one of the riskier types of business loans. Interest rates are typically based on credit scores, starting at 8% and then increasing substantially for lower credit scores. Typically with hard money funding options, property or commercial real estate are offered as collateral to mitigate borrower default. A lender will determine the viability of financing your venture by calculating a loan to value ratio, determining the value of any collateral, and evaluating your risk profile. Despite this financing vehicle being unregulated, it does come with a few surprising benefits. Interest rates can often be between 9% and 21% and processing time can be swift, making hard money loans ideal for emergencies.

Hard Money Loan Requirements

There are many types of business financing available. The requirements vary significantly from one lender to another, but the base requirements tend to overlap:

• An asset is required as collateral. 
• A down payment is expected but not always required. 
• As these loans are geared towards real estate upgrades, a property asset is required. 
• Credit scores are confirmed during the application process and can be 600 points. 

Hard Money Loan Rates

As the banks are averse to this borrowing structure, there is space for individuals and online finance houses to fund projects that carry potentially high returns with little startup funding. For example, budding property developers looking to invest in a home-upgrade project would fall into this category. 

The business loan application process has a loan-to-value and interest rate factor. These two points determine the terms and rates for the funding. Assets are weighed against the investment required, and an LTV figure is calculated. The repayment period is factored in, which can range from 1 - 12 months, and within a week - a deal may be structured for you.

Hard Money Loan Pros and Cons

Hard Money Loan Pros:

• Speedy application process - the entire process is generally completed quickly as the lender does not need to perform multiple credit-worthy checks.

• Existing client approvals - These approval timeframes can be cut further if you have an existing relationship with the lender.

• Credit rating - Adverse credit scores will not disqualify you from a successful application.   

• Potentially favorable interest rate - Theoretically, you would be able to attract a rate that is within the region of bank-based loans.  

Hard money loan cons:

• Increased risk profile - This type of assistance also attracts higher rates of return for lenders.  

• Additional fees - These interest rates exclude origination and administration fees. 

• Down payments may be required - It is common-place to put down a deposit or down payment to initiate the advance.  

Final Thoughts

As a business owner, obtaining a small business loan conjures up images of endless paperwork and unending red-tape. The mere thought of the application process can be daunting. A hard money loan borrowing structure is a viable one when you select the lender that best suits you from our top hard money loan table - carefully compiled by our industry experts.