6 Types of commercial hard money lenders

Check out the article of PaperFree.com on 6 types of commercial hard money lenders to get a brief knowledge about the different types of hard money loans.

last updated Wednesday, April 23, 2025
#COMMERCIAL HARD MONEY LENDERS #hard money commercial lenders

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by John Burson

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Hard money lenders provide capital to businesses and individuals, often for real estate transactions or business development projects. These loans are typically asset-based, meaning they are secured by the value of the property rather than the borrower’s creditworthiness. Hard money loans are mainly used for commercial real estate development, renovations, or other high-risk ventures where traditional bank financing is not an option.

If you're looking to obtain a hard money loan for a business or real estate investment, it’s essential to understand the various types of commercial hard money lenders available. Here are the different types of lenders you can consider when searching for hard money loans.

Hard money lenders offer capital to businesses and individuals to finance business development projects or buy real estate. Hard money loans are mainly used for real estate transactions, such as commercial development or redevelopment projects.

Types of Commercial Hard Money Lenders

There are several types of commercial hard money lenders that you can consider when you need a hard money loan. Here are the different types of commercial hard money lenders.

1. Commercial Banks

Commercial banks are generally not considered traditional hard money lenders, but they can sometimes offer short-term loans or lines of credit for real estate transactions. These loans tend to have lower interest rates and longer repayment terms than typical hard money loans. However, commercial banks require thorough credit checks, a stable financial history, and substantial documentation, making them less suitable for borrowers who need quick funding or have less-than-ideal credit.

For borrowers who qualify, a commercial bank might offer a traditional business loan or mortgage loan for purchasing real estate or expanding a business. But if you’re looking for a flexible, short-term financing solution, hard money lenders may be a better option.

2. Mortgage Banks

Mortgage banks differ from traditional commercial banks in that they focus on providing mortgage loans directly to borrowers, usually for purchasing residential or commercial properties. However, mortgage banks are typically not hard money lenders. They deal with conventional loans that follow stricter guidelines and underwriting standards compared to hard money loans.

While mortgage banks do risk their capital, their loans are often based on borrower creditworthiness and property appraisals, not just the asset’s value. Hard money loans, in contrast, are mainly based on the value of the property being purchased or developed, regardless of the borrower’s credit.

3. Mortgage Brokers

A mortgage broker is an intermediary who helps connect borrowers with various lending sources, including hard money lenders. While a mortgage broker doesn’t directly lend money, they facilitate access to multiple lending institutions and can help borrowers secure a loan that best fits their needs.

In the case of commercial real estate, a mortgage broker can help you find hard money lenders who are more flexible and willing to fund higher-risk or distressed properties. Mortgage brokers are ideal if you are looking for a variety of lending options and want to compare terms from multiple lenders.

4. Finance Firms

Many finance firms offer hard money loans as a core part of their services. These firms specialize in providing asset-based loans to businesses and real estate investors who need quick access to capital. Finance firms are typically more flexible than traditional banks and are more likely to offer hard money loans with higher interest rates and shorter repayment terms.

These lenders usually focus on properties or projects that have significant value but may pose higher risks. For example, a finance firm may provide a hard money loan for a real estate investor looking to purchase a distressed property and renovate it for resale.

5. Credit Unions

While credit unions can be an affordable option for many borrowers, they are rarely involved in hard money lending. Credit unions are member-owned, nonprofit organizations that often offer lower interest rates on conventional loans, including auto loans, mortgages, and small business loans. However, credit unions focus on traditional lending and tend to have stricter eligibility criteria.

Since hard money loans are typically used for high-risk ventures or real estate transactions that banks may not approve, credit unions are not the best option for most hard money borrowers. That said, credit unions may still be an excellent choice for low-interest traditional loans if you have good credit and don’t need a high-risk, short-term loan.

6. Hard Money Online Borrowing Companies

One of the best alternatives for securing a commercial hard money loan is through online borrowing companies. Many online hard money lenders operate via digital platforms, making it easier for borrowers to compare rates and apply for loans without leaving home. The rise of online hard money lenders has made the process more accessible, allowing businesses and real estate investors to get funding quickly.

These lenders typically offer asset-based loans for commercial real estate, fix-and-flip properties, or land development projects. Online platforms often specialize in providing fast, flexible loans for higher-risk ventures, making them a convenient option for investors who need quick access to capital.

Final Notes

The key difference between hard money lenders and traditional financial institutions (such as commercial banks and credit unions) is the type of collateral and the nature of the loan. Hard money lenders base their loans largely on the value of the property or asset being financed, rather than the borrower’s credit score or financial history. They offer quick funding with higher interest rates and shorter loan terms, typically used for short-term real estate investments like flips or development projects.

 
 
 

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