Funding 101: Prep


Hard Money Lenders are lenders that offer specialized financing for real estate-backed loans. Unlike traditional banks, Hard Money Lenders typically charge higher interest rates because they back non-conforming applicants who are considered a higher risk.

How much Capital is Available?

While there is no specific limit on what Hard Money Lenders will offer, amounts of up to $5,000,000 are considered within their wheelhouse.

What type of Interest Rate will I pay?

Interest rates at their lowest will certainly be higher than that of a bank – probably 2% points or more. But that’s only if you are very bankable, in which case you may not need a Hard Money Lender to begin with.

The more likely scenario is that your deal has a lot of risk, which is why the bank did not finance you, and why you would have to consider a rate as high as 20% (or more) in order to get your deal financed. When it comes to high risk lenders, high interest rates frankly come with the territory.

What type of Collateral will I need?

The basic collateral for a Hard Money Loan is the real estate asset itself that you are lending against. In comes cases, however, the Lender may ask for additional collateral. Often this will come in the form of other real estate assets that may be applied toward the loan in order to secure it.

When does a Hard Money Lender Make Sense?

Simply put – Hard Money Lenders make sense when a traditional bank turns you down. There can be many reasons why the bank may have denied your loan, but ultimately it comes down to the fact that the risk isn’t worth their reward (the interest they will charge). Hard Money Lenders take on the same amount of risk; they just charge a much higher interest rate to make up for it.


A hard money lender is often an alternative when you cannot get approved for bank financing. The interest is almost always at least 2% points higher than a traditional bank. Hard money lenders can be a good source of capital for slightly riskier deals than a bank will accept.