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A Comprehensive Guide to Hard Money Lending – PART 2

(This is the second part of a 2-part series on hard money lending and its main features and requirements)  

If you missed part 1, here’s a brief summary that will help you understand hard money lending:

  • Hard money loans are short-term loans (6 months to 2–5 years) funded by individual investors or groups of investors. Hard money loans are used for the acquisition, development or expansion of commercial and industrial real estate properties.
  • Hard money loan approval is based on the value of a borrower’s property i.e. collateral. Unlike banks, credit score doesn’t have a make or break effect on the approval of a hard money loan. Hard money lenders are mainly concerned about a borrower’s collateral value than their credit score.
  • A hard money loan provides a real estate investor quick access to funds and flexible terms and conditions of the loan. Borrowers can negotiate loan amount and terms with hard money lenders. On the contrary, banks have much more rigid loan eligibility criteria, terms and conditions.
  • Due to shorter loan durations, hard money lenders charge higher interest rates as compared to banks.

Hard Money Requirements: What Borrowers Should Know

It’s important to understand that hard money lenders have set their own requirements for borrowers. However, majority of lenders focus on these essential factors:


As stated above, hard money lenders are primarily concerned with the value of a borrower’s property i.e. collateral.

The value of your property will demonstrate to lenders your capacity to repay the loan. As long as the collateral value is sufficient enough, a hard money lender can overlook your low credit issues. However, in the case of a bank loan, it’s unlikely that you will get a loan approval with bad credit history. Banks assess a borrower’s credit score in order to gauge their ability to repay the loan.

Application Form And Photos

Due to less paperwork, the hard money loan application process is simpler than a bank’s loan application process. Banks require borrowers to fill out countless application forms and submit documentation, including personal and company financial statements to secure funding.

However, a hard money loan application is quite straightforward. Majority of lenders require basic information from borrowers, including name, contact information, property information, years of experience in real investing, purpose of the loan, use of funds, and so on.

Some hard money lenders also ask borrowers to submit clear pictures of the property. Be sure to provide photos of the interior and exterior.

How To Apply For A Hard Money Loan

If you’re considering applying for a hard money loan, follow these simple steps:

  • Find an experienced and reliable hard lender. Perform a comprehensive research on lenders to make sure you pick someone who can cater to your specific financial requirements and requirements. Check if the lender has a legitimate website and business to safeguard yourself against fraud and scam.
  • Arrange a meeting with the lender. Discuss your financial needs with them. Ask about their previous deals and experience in hard money lending. A good lending agency will always be willing to provide information to their clients. When you get a specified loan timeframe from the lender, decide whether or not it will work for you.
  • Next step, fill in the loan application form. Present additional documents that the lender may require. Submit a detailed business proposal and financial analysis report of your project to the lender so that they understand the purpose of your project and how you are going to use and repay the hard money loan.
  • Communicate your contract price to the lender. In most cases, hard money lenders are ready to fund 60–70 percent of the property’s after-repair value. You will have to arrange the remaining amount yourself.
  • If the lender finds the deal satisfactory, you will get an approval from them. They will inform you the amount and terms of the loan.

No two hard money lenders are the same. Therefore, the loan application process may vary from one lender to another lender.

Things To Remember

A hard money loan is a great option when a real estate investor has credit issues and they cannot secure bank funding. Similarly, when a buyer needs quick access to funds, a hard money loan is the right option. Given that hard money funds can be acquired within a reasonable time, the loan is ideal for home flippers.

If you’re interested in securing a hard money loan from a reputable lender, get in touch with Harper Financial. At Harper Financial, we provide a wide range of hard money loans, including bridge loans, rehab loans and more at competitive rates.

As one of the leading alternative lending companies in Massachusetts, we can help you quickly find a loan solution that will suit your specific financial needs. Feel free to contact us if you have any questions.