Financing
Hard-money loan
A privately funded, property-secured loan commonly used for time-sensitive or transitional real-estate projects, with terms driven heavily by collateral and the exit plan.
Glossary
Financing
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Nebraska Department of Banking and Finance: hard-money lending investor risksA hard-money loan is property-secured financing supplied outside a traditional bank mortgage channel, often by a private lender or fund. Underwriting commonly gives substantial weight to the collateral, project budget, after-repair value, and a credible way to repay the loan. The borrower and guarantor can still matter; “asset-based” does not mean income, experience, credit, or liquidity will always be ignored.
Real-estate investors may consider hard money when timing, property condition, or a transitional business plan does not fit a conventional mortgage. Examples include acquiring and renovating a distressed property or funding work before longer-term financing. The product name is informal rather than one uniform national loan program, so rates, points, draws, reserves, guarantees, default terms, and oversight differ by lender and jurisdiction.
The central underwriting question for the borrower is the exit. Sale and refinance are future events, not guaranteed funds. A delayed renovation, lower appraisal, leasing problem, title issue, or changed credit market can leave an expensive secured loan outstanding after the original plan date.
Compare the complete term sheet: principal advanced at closing, repair holdback and draw rules, interest charged on funded or committed amounts, points, extension and inspection fees, maturity, payment structure, recourse, default rate, lien position, and prepayment terms. Confirm lender and broker licensing requirements for the transaction with qualified local help.
Build an exit plan that can fail safely
Write the expected sale or refinance date, the evidence supporting value, the work and lease milestones required first, and a fallback if the exit is delayed. Include carrying costs through the fallback period rather than budgeting only to the optimistic completion date.
Hard money is not the same as every bridge loan
Both labels can describe short-duration financing, but “bridge loan” is broader and may include institutional products with different underwriting and pricing. Read the note and security documents instead of treating either marketing label as a standard set of terms.