Pros and Cons of Commercial Hard Money Loans

Hard money loans are becoming a viable option for many within the marketplace, but they are not always the best solution for real estate investors.

it's crucial that you take into consideration the pros and cons of hard money lending before you make a financing decision for your commercial property. In this new post, we’ll explain what you should know about hard money loans and when they may or may not be applicable for your financing needs.

What Is a Hard Money Loan?

A hard money loan is an asset-based loan offered primarily by private lending companies.

Within hard money loans, the property itself is the collateral for the loan payments. This can be a benefit for investors who don't want to tie up their own money in a real estate transaction. A hard money loan can also provide investors access to capital more quickly than a traditional loan.

First, the Positive Elements of Hard Money Lending

Hard money loans are not a great fit for every borrower. That being said, there are some advantages hard money loans have over other types of mortgage solutions.


In many cases, hard money loans can be provided in as little as two weeks after the lender has received all the required documentation.

Limited Credit Requirements

Borrowers can often secure a hard money loan even if they have bad or no credit. Even those who have recently experienced a bankruptcy may find themselves eligible for hard money financing. 

Fewer Documentation Requirements

Another important aspect to consider when reviewing hard money loans is that there are fewer documentation requirements. It's the asset that is under consideration and not the borrower, and so the borrower has fewer demands in place.

There Are a Few Drawbacks to Hard Money Loans

As with any form of lending, it’s imperative you look in-depth at the drawbacks to hard money loans. These drawbacks might include the following:

High Interest-Only Payments

A hard money loan requires you to pay high interest-only payments as you pay off your costs. That can be challenging for those with other debts to pay during the loan term.

Short-Term Financing

The hard money loans are only available in the short-term and must be paid quickly, so it's essential you have the resources to pay the loan and have a clear plan for managing your finances.

Alternative Solutions Do Exist

Borrowers who are denied bank loans often feel as though their only other option is a hard money loan.

In many cases, borrowers who resign themselves to the high costs associated with hard money loans are actually eligible for alternative lending solutions. As an example, Commercial Direct, a division of Silver Hill Funding, LLC, can help borrowers secure permanent financing at rates closer to those of traditional banks. For those who don’t plan on taking advantage of a hard money loan’s short term, this kind of alternative can meet a greater number of needs.

Not sure if a hard money loan is right for your situation? Our team has decades of background experience in the industry and is ready to answer each of your questions. Get in touch with us today to learn more.