There are a lot of misconceptions regarding hard money loans. Some think it’s a funding tool exclusively for real estate investors, while others assume this type of lending is all about predatory interest rates—both being misconceptions. The truth is that hard money loans are suitable for financing businesses and investments of any nature and can be secured at the most competitive interest rates.
Despite the versatility of hard money loans, little is known about how commercial hard money lending actually works. Commercial loans sure can resurrect struggling businesses, but when used strategically, they can also support businesses looking to make bold and innovative moves towards higher profitability.
We have put together this guide to discuss the following:
- What makes hard money loans for commercial purposes unique
- When to use commercial hard money loans
- How to find quality commercial lenders for your need
Commercial Loans vs. Commercial Hard Money Loans
Commercial loans typically refer to any type of short-term financing used by companies to facilitate business operations or to add a capital asset. In terms of traditional lending institutions like banks and credit unions, commercial loans include:
- Lease financing
- Equipment financing
- Lines of credit
- Construction loans
- Commercial vehicle loans
Conventional commercial loans are offered based on the business’ revenue predictions, average annual turnover, profit and loss statements, and a host of other reports. Depending on the type of loan taken, the bank may or may not ask for collateral.
Commercial hard money loans operate beyond the bureaucratic regulations of banks and other conventional lenders. The core purpose of the loan is the same—to acquire a business asset or bring in working capital—but the approval happens faster and with significantly less reporting and paperwork. It’s because hard money lenders offer commercial loans strictly based on the collateral provided. They wouldn’t dive deep into a business’s credit score, payment defaults, pending taxes, brought-forward losses, and similar factors.
Commercial hard money lenders charge slightly higher interest rates than banks to compensate for the more convenient and time-sensitive funding provided. Regardless of the lender, the loan term is generally 1–3 years. Some lenders also allow businesses to renew commercial loans, considering the collateral retains enough value.
Source: Thirdman
When To Take Out a Commercial Hard Money Loan
Most people think of commercial hard money loans only when they’re in dire need of funds or are looking to resell/fix and flip houses. In reality, the less paperwork and fast approval structure of these loans make them suitable for a number of business scenarios where the right timing equals success. Check out the five most in-demand hard money loan deals:
- Equipment or tech purchase—Commercial hard money loans are convenient for purchasing new equipment and tools for your business quickly (you may opt for a refinance loan eventually). This is especially important if you want to invest in new tech that may not be approved for a loan by banks due to bureaucratic limitations
- Construction—Progressive inflation impacts the overall outlay in construction contracts. If you want to avoid ballooning costs and expedite construction at current prices, hard money loans back you up
- Supplemental funding—Banks only offer limited funds based on the status of your credit and financial statements. Many businesses opt for a combo of bank and hard money loans to meet the full funding requirements
- Inventory and working capital management—Hard money loans can support urgent working capital needs to sustain in the market during hard times. Many healthy businesses also consider hard money loans for just-in-time (JIT) inventory management to optimize production efficiency and reduce storage costs
- Business acquisition or expansion—If you’re looking for growth via expansion or acquisition activities, you can take out a hard money loan to strategically get ahead fast, especially if you’ve competitors with similar action plans
In summary, if your business funding situation calls for urgency, lax eligibility criteria, or plain convenience, getting a commercial hard money loan is your answer.
Hard Money Loans for Commercial Real Estate and Other Business Assets—Lending Terms
We mentioned that commercial hard money loan terms are mostly similar to what banks offer, except for the interest rates. Most traditional lenders charge from 5% to 9% for commercial loans, while hard money lenders charge anywhere between 8% and 22%. The range is larger because hard money lenders adopt a more direct approach with borrowers. The interest rates fluctuate depending on the following:
- Saleability of the collateral—Real estate assets are usually easy to sell, but that may not be the case for other business assets like machinery and tech. You may have to pay a higher interest rate for slow-to-sell collateral
- LTV (loan-to-value) ratio—LTV ratio determines the amount the lender offers as a loan and is usually up to 75% of the collateral value or purchase price, as the case may be. A low LTV ratio can get you a low interest rate as that means you’re putting down a large chunk of your own funds into the deal/project and are less likely to default
- Business reputation—Regular commercial borrowers with a clean repayment history are charged lower interest rates than occasional borrowers. Some lenders don’t lend to people who’ve had multiple businesses go bankrupt in the past
Source: Pascal Meier
Besides the interest rate, you can expect one or more of the following cost components in the hard money loan:
| Cost Component | Estimated Outlay |
| Origination fee | 1%–5% of the principal |
| Down payment | Depends on the LTV ratio (100 – LTV ratio) |
| Legal and processing expenses | $500–$3,000 |
| Property appraisal costs | $350–$850 (depending on your state) |
| Prepayment penalty | 0.5%–5% of the outstanding amount (if paid before a specified time) |
How To Find Cooperative Commercial Hard Money Lenders
Commercial hard money lending is a competitive industry attracting many investors, so choosing a lender can be difficult. When looking for a lender, knowing how they fare in terms of overall borrowing convenience is crucial. Most people evaluate the top options available on the following parameters:
- Interest rates
- Approval speed
- Required documentation
- Initial costs
- Prepayment penalty rates
- Customer reviews
A preliminary evaluation will help you call dibs on the best deal and also avoid getting trapped in predatory terms levied by certain lenders.
Source: Lukas
Need Fast Commercial Hard Money Loans? Try Hard Money Loan Solutions
Hard Money Loan (HML) Solutions offers the fastest funding approval to qualifying commercial borrowers. The Florida-based lending group consists of veteran investors and top entrepreneurs who aim to help businesses grow with timely funding in a no-hassle setup. You get the most attractive interest rates, repayment windows, and initial costs—no down payment requirement.
Refer to the following table to get an estimate of the commercial hard money lending terms at HML Solutions:
| Parameter | HML Solutions |
| Interest rates | 9.99%–12% (determined according to the LTV ratio) |
| Term | 1–3 years |
| Interest rate type | Fixed |
| Loan amount | $100,000–$50,000,000 |
| LTV | Up to 70% of the current purchase price or appraised asset value (whichever is lower) |
| Origination fee | 2 points or 2% |
| Closing time | 3 days to 2 weeks |
| Amortization | Interest only |
Apply for a commercial loan at HML Solutions to enjoy the most competitive terms in the industry. You don’t have to worry about any prepayment penalty if you repay after six months.
HML Solutions facilitates bridge, refinancing, cash-out refinancing, and fix and flip loans, as well as short sales within 3–14 days, which is faster than most competitors. You can also approach them for other investment opportunities, including:
- Construction and reconstruction
- Business acquisition
- REO (real estate-owned purchase)
- Acquisition of bank-foreclosed properties
- Investment in special and/or unicorn projects
- Real estate purchase (all kinds, including commercial land, building, or single- and multi-unit residential property)
Source: Sebastian Herrmann
Borrowing Convenience at HML Solutions
HML Solutions holds a 5-star rating on Google and multiple reviews complimenting the top-notch borrowing convenience provided. The following table outlines some of HML’s stellar service features:
| Service Feature | What To Expect |
| Business-specific treatment | HML Solutions has a flexible approach toward lending. The lenders analytically fix interest rates and repayment terms tailored to your situation |
| Minimal paperwork | HML Solutions is able to process loans faster because of light documentation requirements. In most cases, you’ll only be asked for paperwork related to the collateral |
| Easy and transparent approval process | All applicants who offer robust collateral and agree to the LTV ratio are eligible for a hard money loan at HML Solutions. The lender team is super transparent. They inform you right away if they cannot approve your loan and try their best to advise you on alternative borrowing options |
| Funding commitment | Many lenders have a clause that lets them tap out of deals at the last minute, causing huge losses to commercial borrowers. HML lenders always honor their professional commitment once a loan is approved |
| Holistic lending support | HML Solutions’ prime philosophy is creating mutual growth opportunities and extending all-around help for borrowing issues. The team is friendly and willing to listen to the specifics of your situation. Even in case of repeated defaults, they talk to borrowers and gauge their situation before taking extreme measures like foreclosing |
Find a Funding Solution Superfast—Talk to the HML Team
Reach out to HML Solutions online to arrange a phone call with a member of the lending team. Here’s what you can expect from the process:
- First, you need to submit an online loan application to get started. Provide information about your business and collateral so that an HML agent can review your request (all info is confidential)
- Once an HML team member calls you, discuss the deal and provide details about your situation
- The HML team will then assess and finalize your loan package according to relevant industry standards (they may carry out a property appraisal if necessary)
- Review the package and accept or reject the loan offer
Source: Rene Asmussen
How Are Hard Money Commercial Loans Different From Non-Commercial Loans?
Hard money lending applies to both commercial and non-commercial scenarios. The following table will help you understand the difference:
| Aspect | Commercial Hard Money Loan | Non-Commercial Hard Money Loan |
| Purpose | Offered for the purpose of making a profit or fulfilling a business need. Examples include: Renovating and flipping houses Purchasing machinery Buying commercial land Refilling inventory | Offered to complete a personal liability. Examples include: Renovating self-occupied property Paying off accrued debts Buying residential or rental units |
| Qualifying collateral | Can be any hard asset the business owns, such as: Commercial real estate Equipment Vehicles | Has to be a personally owned hard asset, such as: Residential home Precious metals Paintings and collectibles |
Keep in mind that most active hard money lenders prefer providing only commercial real estate loans. If you desire versatile borrowing features for both commercial and non-commercial projects, work with the lenders at HML Solutions. They are also open to funding businesses where a key person offers personal property as collateral—apply today to get a customized loan package for your funding needs!
Featured image source: RODNAE Productions
