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What is Hard Money Commercial Lending?

August 18, 2015

What is Hard Money Commercial Lending? And how does it differ from traditional lending? Keep in mind that the term bridge loan is often used interchangeably with hard money loan.

Be sure to visit our Bridge Loans/Hard Money product page to learn about our great commercial bridge loan products. You can discover how we are competitive when it comes to rates and terms.

Fairview  Commercial Lending (www.fairviewlending.com) gives the following definition: “The definition of a hard money, when referred to in real estate financing, is essentially a non-bankable loan. The name hard money is frequently interchanged with 'no-doc' or private loans.”  

With a hard money loan, underwriting is based quite a bit more on the real-estate compared to the finances of the borrower. However, the finances of the borrower still plays a part.

For example, if a borrower has low credit scores, it could very well affect the rate and terms. A borrower with very low credit will tend to pay rates and terms that are quite a bit higher. And hard money commercial loans demand that the borrower has quite a bit of liquidity due to a greater percentage of down payment required than the typical conventional commercial loan.

One advantage that hard money commercial loans have is that the loans close more quickly. Some hard money loans can close in 30 days or possibly less.

The risk to the loan source involved in hard money commercial loans is substantially higher than in conventional loans. Therefore, the rates and terms can be quite a bit higher for hard money. Rates for example on hard money multifamily loans could range typically between  6% to 15%. The number of points on a hard money multifamily loan is typically several points, but could be higher.

Some situations that call for a hard money commercial loan:

  1. Borrower has low credit scores
  2. Property needs rehab.
  3. Occupancy is low.
  4. Property doesn’t have high enough cash flow.
  5. Foreclosures, bankruptcies, tax liens, judgments.

Most importantly, we recommend that you do not get involved in hard money unless you are experienced as an investor with hard money, or you have someone working with you who has been an investor doing hard money loans. The reason is that there very well could be substantial risk to the investor in doing hard money.

Contact us to see if you qualify for our best multifamily, commercial, or bridge loan rates and terms. Keep in mind that one of our specialties is commercial bridge lending. Also, contact us if you would like to discuss your particular commercial lending needs, or if you have questions. Call 214-695-7310 or send an email to info@apartmentloanstore.com

To discover more about our loan products as well as rates and terms, See our Loan Programs page.

Bruce Painter, Director of Marketing, Business Loan Store