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A Guide to Managing Hard Money Loans

For new or cash-strapped investors with poor credit histories, getting a bank loan can be an uphill battle. Since the financial crisis of 2008, banks and conventional lenders have become much more conservative in underwriting of loans. As a result, many real estate investors do not meet the lending criteria set by banks and other traditional lending companies.

Fortunately, alternative loans give hope to real estate investors with flawed credit history seeking financing.  One word that comes to mind when we speak about alternative financing is hard money.

Hard money is the most widely used alternative loan product. Issued by a private or non-institutional lender, hard money loans are used for financing commercial real estate projects.

Hard Money Loan 101

A hard money loan is a short-term alternative loan. In order to apply for hard money financing, you need to submit collateral to your lender. While interest rates on hard money loans are usually higher than bank or conventional loan rates, hard money are easier, quicker to obtain than traditional loans. At the same time, you can repay the loan before the maturity date. Unlike bank loans, you won’t have to worry about a prepayment penalty with hard money.

How To Become A Successful Hard Money Loan Borrower

Once you’ve received the loan from a private lender, it is imperative that you follow proper debt management practices. Here are some simple ways to manage and close hard money deals successfully:


First off, you need to know your loan and real estate project. The more information you obtain, you can plan loan repayment much more effectively.

For your real estate project, create a business plan that includes the following information:

  • The name and location of the property
  • Property description
  • The current and projected financials of the property
  • Your credit history and other financial information

Even though hard money lenders are not regulated by banking policies, they are interested in knowing what their money is going to be spent on and how they will be getting it back. Submit your business plan to your lender.

In addition to your project report, create a loan repayment plan to manage your funding.  This plan should include the amount of money you are getting, the interest you are paying, the loan duration and maturity date, and the amount that is still outstanding. Keeping track of funding is crucial to ensure a seamless exit.


Maintain open, direct and honest communication with your hard money lender. If you have any questions or concerns, contact your lender promptly.

Keep in touch with your lender throughout the duration of your loan. Do not conceal any information from them.


If you commit to something, make sure you do it. Trust is the foundation of a successful lender-borrower relationship and funding.


Do not be afraid to take risks. Many investors seek additional funding to repay the previous hard money loan.

However, take calculated decisions and prepare yourself for ups and downs. Before taking risky decisions, you need to know what you’re doing.


As mentioned earlier, you will experience many setbacks during the journey. Do not lose your focus. Keep your eye on the end result i.e. successful exit.

If you are looking for a reliable hard money lender near you, get in touch with us.

Harper Financial offers a variety of alternative loans to new and savvy real estate investors across the country. Our loan products include hard money, bridge loans, foreclosure workouts, partner buyouts, rehab / renovation loans, bankruptcy trustee payoffs, reaffirmed mortgages, non-reaffirmed mortgages and confirming commercial loans.