What Is a Hard Money Bridge Loan?

Hard money providers will typically lend 60 to 70 percent of the property value.

A hard money bridge loan is funds from private investors, provided as cash, for borrowers with an urgent short-term need. Although similar to a straightforward residential bridge loan, hard money lending is aimed at commercial borrowers.

Purposes

Companies use hard money bridge loans for business and real estate transactions as a financial stopgap. If a shareholder wants to leave, this type of loan can be used to borrow money against company assets to buy her out. Hard money loans are also used by developers needing to finance a property deal quickly. It's a faster process than conventional borrowing from banks.

Characteristics

Hard money loans charge a higher interest rate than regular bank loans. They provide a fast exchange of funds and are repayable within a year. Lenders will take more risks on the borrower based on in-depth knowledge of financial history, personal assets, business background and recommendations. The loans can be actioned within seven days.

Considerations

These loans work best for borrowers needing money quickly and lenders wanting the highest return.

Disadvantages include high interest rates and expensive fees. Because the terms vary widely between lenders, a company must research thoroughly before borrowing. This loan isn't suitable if the bridging period isn't definitely known.

References

• W-Financial: Why would a borrower choose a hard money loan instead of a conventional bank financing?
• W-Financial: What is a typical time frame for closing a loan?
• Commercial Funding International: Hard Money Loans
• Bridge Loan
• Vallecito Financial Group: Hard Money Loans