How Do Hard Money Loans for Business Work? All Info in One Place


Hard money loans are generally sought for real estate financing, but they can also work for funding businesses of any nature. Since this type of lending is completely backed by private investors and lending companies, potential borrowers find it difficult to get clear-cut info on what terms and conditions to expect.

Hard money loans for businesses operate the same way as other hard money loans—you need to offer a solid property or asset as collateral, but are there other factors required to qualify? 

In this guide, we’ll look at all the essential info you should know, including:

  • How to qualify for hard money business loans
  • Where to find the best hard money loan lenders for business funding
  • What the pros and cons of such loans are

How Does a Hard Money Loan for Business Differ From Regular Business Loans?

When you approach traditional lenders (banks, credit unions, etc.) for funding your business, your creditworthiness is the primary qualification factor. They check your existing income source, credit score, tax returns, business strategy, and similar aspects to assess if you can repay the loan. There is a collateral element to the loan, but you can’t qualify if your credit health is found lacking.

A hard money business loan is an alternative source of financing that allows you to get fixed or working capital funds solely based on collateral. Hard money lenders have less strict background checks, which means even a business with a bad credit history or repeated tax defaults may be approved for a loan. Financially sound businesses also opt for these loans because there is less documentation involved, and the approval process is super quick—often finalized within 14 days!

Hard Money Business Loans—Uses

Initially, hard money loans were mostly used by property investors for flipping houses—they collateralize the house in question, repair or renovate it, and sell it for a profit, usually within three years or less. In the past few years, hard money lenders have branched out to support other business transactions as well, such as:

  • Funding urgent projects
  • Buying rental or commercial properties
  • Grounding startup or novel projects
  • Facilitating research and development
  • Acquiring existing businesses

It’s common for businesses to go for these loans to keep their operations afloat in hard times when they do not qualify for traditional financing or when they need quicker funding. Savvy entrepreneurs generally prefer hard money business loans over traditional loans to push time-sensitive construction activities, inventory purchases, expansion strategies, asset additions or replacements, and similar goals to outperform competitors.

Source: fauxels

Typical Terms for Business-Related Hard Money Loans

Hard money business loans tend to carry higher interest rates than regular loans because the lender is operating at a higher level of risk. Here’s an overview of the terms and conditions you can expect:

Interest rateHard money lenders usually charge 8%–15% for real estate-based deals, but they may seek higher rates for business loans because:
Business income is highly unpredictable
The risk of default is greater
On average, lenders want 10%–18% interest annually for hard money loans for business purposes. You can expect a lower rate if you:
Have a good credit score
Generate steady annual revenue
Are okay with a low LTV (loan-to-value) ratio
Down paymentHard money lenders offer a percentage of the amount you require for your business need—also called the LTV (loan-to-value) ratio. You must contribute the rest out of your own pocket or by taking a personal loan.
The lender may ask you to deposit the contribution as a down payment or simply prove that you have the funds to honor the entire financial commitment.
The LTV ratio for hard money business loans is often under 65%.
Loan termIn most cases, hard money loans for businesses are offered for a term of 1–3 years. Longer terms don’t make sense to lenders, especially when the business is volatile or new.

Hard Money Startup and Business Loans—How To Qualify

Qualifying for business-related hard money loans is fairly easy as there’s less scrutiny over your personal credit status. Your chances of getting approved are higher if you:

  1. Present robust collateral—First and foremost, hard money lenders check the value of the collateral you provide. They will look for:
    1. The latest appraised value of the property or other asset
    2. Your equity share in the asset (in case of multiple owners)
    3. Relevant title deeds
  2. Agree to a low LTV ratio—A low LTV ratio (50% and under) suggests that the business or project is mostly powered by your own money. Greater self-contribution brings down the risk of defaults
  3. Have past business experience—It’ll be easier to secure a hard money business loan for a novel project if you’ve managed businesses successfully in the past. For an existing business, provide indicators of healthy operations, such as:
    1. Steady generation of revenue
    2. Decent receivables turnover ratio
  4. Chalk out a solid repayment strategy—Borrowers often underplay the importance of a good repayment strategy, but it’s a must-have if you seek business loans. No lender would move ahead with the deal if they don’t know how you’ll generate the income to pay them off. You can:
    1. Present your business income model
    2. Give a disclosure of available contracts
    3. Reveal future refinancing plans with traditional lenders
  5. Enjoy a fair credit score—Some hard money lenders refuse business loans to people with poor credit scores even if they have quality collateral

Refer to the following table to get an idea of the different categories of credit scores:

Under 580Poor
740–799Very Good

How To Find Good Hard Money Business Loan Lenders

Raising hard money loans for a business or project won’t be the smoothest process if you’re dealing with an inflexible and uncooperative lender. Here are some of the best practices for finding reputable people in the hard money lending industry:

  • Look for well-reviewed lenders—Most borrowers start looking for hard money lenders online. You can note down the options available in your area and compare interest rates and terms. Consider the lenders that have been reviewed well as that signifies a good customer experience
  • Visit real estate events—Real estate conferences, workshops, and coaching events are popular for prospecting potential lenders. You can book slots in these events online or ask your real estate friends to help you out
  • Ask peers—Reach out to other businesses and startups that have used hard money funding to get relevant recommendations

Source: Antonio Jamal Robertson

Looking for the Best Hard Money Loan Lender? Try Hard Money Loan Solutions

Hard Money Loan (HML) Solutions is a Florida-based group that offers multipurpose hard money loans with competitive terms. It is a team of veteran lenders and entrepreneurs who appreciate bright investment opportunities. Whether its a real estate deal or a business loan, they are ready to fund you as long as you:

  • Offer collateral with enough equity—land, buildings, jewels, and other valuables are also acceptable
  • Have funds to meet the LTV ratio

HML Solutions offers LTV up to 70% of your investment requirement, calculated on the basis of the purchase price or asset value—whichever is lower. The group determines the LTV ratio by considering a number of factors, including the risk involved and your repayment strategy, but you are guaranteed to get a mutually beneficial deal if approved.

Your credit history, tax return status, and similar technicalities won’t impact the lending decision too much. 

Here’s a summary of the typical lending parameters at HML Solutions:

ParameterWhat HML Solutions Offers
Term1–3 years
Loan amount$100,000–$50,000,000
LTVUp to 70%
Interest rate9.99%–12%
Rate typeFixed
Origination fee2 points or 2%
Closing time3 days to 2 weeks
AmortizationInterest only

HML Solutions doesn’t ask for a down payment deposit, making the immediate cost commitment relatively low.

Source: fauxels

HML Solutions—What To Expect With Business Loans

HML Solutions follows a simple strategy—discuss the deal with full transparency and chalk out the most realistic plan possible. Every case is handled in a time-sensitive manner, and you will be involved in all major lending discussions instantly.

HML Solutions is one of the few lending groups that enjoy a 5-star rating on Google, thanks to outstanding customer reviews. The HML team offers:

  1. Fast approval—Eligible loans are approved within half the time taken by other lenders. That’s possible because, unlike competitors, HML Solutions doesn’t require paperwork like credit checks, bank statements, or financial statements
  2. Flexible approach—The one-size-fits-all philosophy (typical with traditional lenders) doesn’t apply to the hard money lending business because every borrower has unique requirements. HML Solutions adapts to the needs of all clients
  3. Commitment to funding—Most lenders have a clause that says they can back out from the deal anytime they want. HML Solutions never dips out on the commitment once your loan is approved
  4. Convenience—The borrowings are convenient for everybody because of significantly less documentation. Even people who cannot provide a social security number are eligible to apply
  5. Friendly dealings—HML lenders prioritize customer relationships. If they cannot approve your loan, you’ll be notified instantly and offered alternative solutions (if available). Defaults and foreclosures are also handled thoughtfully

Reach out to HML Solutions for all kinds of loans, including those for:

  • Purchase of self-occupied (single-family or multi-family) homes
  • Refinance
  • Cash-out
  • Property rehab
  • Foreclosures
  • Business acquisition
  • Construction
  • Commercial and investment property
  • Bridge financing
  • Fixing and flipping

Apply Online To Get Fast Hard Money Loans With HML Solutions

To seek an HML Solutions business loan, all you have to do is apply online. Here’s what the whole process looks like:

  1. Fill out the online application form with details about:
    1. Your business
    2. Collateral suggested
  2. Discuss the deal with an HML lender once they review the application and contact you
  3. Share all essential details upfront—HML values truthful exchanges
  4. Wait for the lender to follow up with a lending decision

If you have title work and property appraisal docs handy, you can get your funds as early as three days. Other deals are usually fulfilled within 10 days.

Apply today to talk to an expert about your situation! HML Solutions won’t keep you waiting if they cannot service your deal, and every piece of info you shared will be confidential. 

Source: Sora Shimazaki

Alternatives to Hard Money Loans for Business

Here are some other options you can consider besides hard money loans:

  • Equipment financing—If you have to get new equipment, you may consider equipment financing loans offered by traditional lenders. The equipment serves as the collateral, and the repayment period is longer (4–10 years). Interest rates are generally between 10%–22%
  • Factoring services—If you have receivables worth a large amount, you may consider selling them to a factoring service provider for a discounted price (75%–80%). You’re basically capitalizing on your mostly guaranteed future income
  • Merchant cash advances—Merchant cash advances are used by businesses to generate short-term financing. You repay by allocating a percentage of your future revenue to the lender plus a service fee
  • Working capital loans—If you need funds to keep your business running, working capital loans are a good option. These are short-term loans (6–18 months) offered by both banks and private lenders

Keep in mind that these options usually have strict qualifying criteria, some of which include:

  • Proof that you earn a particular sum in monthly revenue
  • Solid credit history
  • Business collateral

If you’re looking for loose qualifying terms, getting a hard money loan with lenders like HML Solutions is your best option.

Featured image source: cottonbro

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