Hard Money Loans
Hard money loans are different than bank loans and are similar to bridge loans. Hard money loans are generally secured through real estate or other hard assets. They are not institutional loans, but are usually made by private companies or individual investors. The loan terms are generally shorter than bank loans, usually ranging from a few months to not more than two to three years.
Hard money loans are more flexible than traditional financing and can be very helpful when trying to close a unique or time sensitive deal. Hard money loans can also be the only means of short term financing for individuals with credit issues who have assets to back the loan. Common credit issues include bankruptcies or foreclosures, but these are not the only situations where hard money loans can be helpful and effective.
Hard money loans are usually made at 65% and up to 75% LTV, or loan to value. This means that the funded amount will be as high as 65 – 70% of the value of the asset used as collateral. This provides security to the lender or investor funding a higher risk project. Often investors or lenders will look only at the value of the asset used as collateral, and not look at credit or other financial indicators of the person or group receiving the funding.