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Hard Money Loans for Small Businesses & How to Qualify

When your business experiences high growth, you may also face rising costs. Your funding should keep up with your success–the last thing you need is to wait on lengthy loan processes when your business could use extra assets. Enter the hard money loan. Hard money loans can provide a quick turnaround on funding so that you can put money into your business almost immediately.

Hard money loans, backed by your own assets, can be used to cover a variety of standard business costs including, but not limited to, personnel, training, renovations, and equipment. They are a great option for entrepreneurs and new business owners who are ready to accelerate their business growth and success.


Accelerating your business success with hard money loans

Small business owners know that it is not uncommon to need a business purpose loan at some point in their development – whether for renovations, new equipment inventory, or even professional training and personnel.

While small business loans are available, they aren’t the only option available when you need cash quickly.

Enter the hard money loan.

Hard money loans are popular among real estate investors, but they can also be used to accelerate your business success. If you need cash for your business quickly, here is how hard money loans may help.

How to qualify for a hard money loan

While traditional loans are based on factors such as lines of credit and personal history, hard money lenders are concerned primarily with one thing: assets. Hard money loans use hard assets – like property – as collateral for a loan so you don’t have to worry about credit or financial history.

Understanding the loan-to-value ratio

Since hard money lenders generally don’t look at credit or financial history, they need a way of protecting themselves from a deal gone wrong. This is why they use collateral and is also why they use a loan-to-value ratio to determine the amount of the loan. In most cases, the full value of the collateral is not used. Instead, lenders typically base the value of the loan on a ratio that is usually less than what your collateral is worth. This provides a buffer in case the value is miscalculated or declines.

What can a hard money loan for a business be used for?

Businesses experiencing growth sometimes also experience considerable costs. The good news about hard money business loans is that they can be used to cover most expenses that apply to the business. This may include:

  • New inventory
  • Personnel and training
  • Product manufacturing
  • Research and development

If you are ready to grow your business, hard money loans are a great option for quickly funding those costs.

Who should use a hard money loan in their business

Hard money loans sometimes get a bad rep because they are easier to acquire than a traditional loan, but hard money for business use is a great option for businesses just getting started and who may be on the fast track to success.

High growth businesses: Businesses experiencing high growth quickly may need a loan faster than a bank could provide. Hard money loans using property as collateral don’t require the same credit checks and approval so can be approved within a week instead of over the course of one to two months.

Entrepreneurs: One of the biggest hurdles in starting a new business is getting funded. Backing businesses with hard money loans can help you get off the ground as you grow and continue to raise funding.

New business owners: New or first-time business owners may not know exactly how much funding they need and run into unexpected costs as their business takes off. They also might not have the history needed to quickly acquire a traditional small business loan.

Paying it back

Hard money loans are offered by private lenders–usually companies and individuals, so they are structured a bit differently than traditional loans. One of the most significant differences between a traditional loan and a hard money loan is the interest rate. This is another reason why they are useful in periods where you expect high growth–you don’t lose time, and money, have to wait on approval, and can start to see increased income sooner.

Why they are worth it

Taking on higher interest may make them seem risky–that and the lender gets the collateral if the loan isn’t paid off. But if you have the assets to pay it off, the benefits are significant.

For one thing, they’re fast. And since lenders are usually private companies and individuals, they have more flexibility and can give individualized care to their borrowers.

A hard money loan can accelerate business success

Sometimes it is difficult for small businesses to qualify for a traditional loan–they may not have the history they need behind them, or they may not have the time required to secure it. Traditional loans generally have a lengthy application and approval process that may cost businesses to experience fast growth and success in the long run. When you are growing your business, you might not have the time to wait on loan approval and funding. With the help of a trusted lender, you can accelerate your business’s growth by putting hard money to work.

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