The Basics of Hard Money Loans

One of the more challenging aspects of running a small business is often finding ways to finance it that make sense for you. With all the options available, it can at times feel overwhelming. That doesn’t mean, though, that there aren’t options out there that will work for you and your specific needs. If you find yourself needing a loan in a quicker time frame than a traditional loan would allow, or have other restrictions that prevent you from obtaining a traditional loan, a hard money loan could be a good option for you.

What Is a Hard Money Loan?

A hard money loan is a type of loan that is a little different from most traditional loans and can be a good option for those that cannot obtain, or do not have time for the process of obtaining a traditional loan. This is because with hard money loans the lender does not go by your credit history or other factors that would normally play a role in determining whether or not you qualified for a loan as much as they do the collateral you can offer. Because it is a collateral backed loan, those offering hard money loans are less concerned with your credit score or credit history, because they know that they have collateral.

What Are Hard Money Loans Good For?

Hard money loans tend to be a good option for those that don’t have established credit, or that need money quickly. Because lenders offering hard money loans usually don’t check into your financial history as much as lenders offering traditional loans, the process to get a hard money loan is often a shorter one than for other types of loans. Not only that, but hard money loans tend to be short term loans, as well.

This means that they tend to last less than five years, so you won’t have this kind of loan hanging over your head for a long time. One drawback of a hard money loan, though, is that they usually have higher interest rates than more traditional loans. However, because they are shorter-term loans, the overall amount of money that you pay in interest may not differ much from that of a longer-term loan with lower interest.

Final Thoughts

When you run a small business, there can be a lot to think about and deal with on a daily basis, especially when it comes to finances. While this may at times feel overwhelming, the reality is that it can be easy to find the right options for you with a little patience and research.


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