Hard Money

A conventional commercial loan is underwritten around your liquid assets, current income and demonstrated ability to service the debt. That works well when your file is tidy. It leaves very little room in special situations or unusual circumstances — and commercial real estate produces a great many of both.

A hard money loan gets around the standardized criteria by focusing on something simpler: your current real estate holdings and the equity you hold in them.

What a hard money loan looks like

• Secured with asset collateral — the property does the qualifying, not your tax returns
• Faster turnaround — substantially less paperwork than a conventional file
• Higher rate of interest — this is the trade-off, and it is a real one
• Greater acceptance rate — files that a bank declines outright are routinely fundable here

The higher rate reflects two things the lender is carrying: the inability to liquidate real estate quickly, and the cost of selling collateral in a worst case. It is priced honestly rather than punitively, and it is the reason the money can move at all.

When borrowers come to us for hard money

• Time-sensitive projects. A closing date that a conventional lender simply cannot meet.
• Collaborative collateral. Several lower-value properties combined to support one loan.
• Credit score issues. A score that fails a bank's cutoff but says little about the deal.
• Buyouts, takeovers and foreclosure prevention. Situations where speed is the whole point.

Use it as a bridge, not a destination

Hard money is expensive to hold for years. The borrowers who use it best have a clear exit from the outset — a refinance once the property stabilizes, a sale, or a lease-up that makes the file bankable. We will ask about your exit early, because a hard money loan without one is a problem waiting to happen.

If the timeline is less compressed, look at bridge loans, which carry longer terms and better pricing on stabilized property.