Hard Money Loans – An Overview

There’s a lot of talk about hard money loans these days. The pros, the cons, the what’s, why’s, and wherefore’s. Here’s what you need to know about hard money loans in a nutshell.


A hard money loan is simply a type of financing, as you might expect. However, it’s a bit different than the loans you may normally think of when the topic of financing comes up. Essentially, the borrower in a hard money loan gets their money based on the value of a piece of commercial real estate.

In the great majority of cases, a hard money loan costs a higher interest rate than do the more typical, traditional commercial loans. This makes them expensive for those taking them on and due consideration should be given to this fact before someone applies for a hard money loan. Another thing you must know is that hard money loans usually come from any place except a commercial bank. Most deposit institutions want nothing to do with hard money loans. Then where do they come from? They come from individuals or other types of companies, in most cases, rather than from traditional financial institutions. They come from private lenders, among them Kennedy Funding, America's leading hard money lender -- specializing in bridge loans for commercial property and raw land development, workouts, bankruptcy and foreclosures.

Hard money loans began appearing in the 1950’s, when the credit industry was first undergoing significant changes. They were a convenient solution for property owners who wanted capital and had no other way to acquire it. Eventually the hard money industry crashed slightly during the real estate collapses of the 1980’s and 1990’s, only to recover again in recent years. Today, higher interest rates go hand in hand with hard money loans as a way to protect the loans and lenders from the considerable risk that they undertake. When dealing with leading hard money lenders, including Kennedy Funding, however, most borrowers are more than willing to pay a slightly higher interest rate in order to escape the endless miles of red tape that traditional institutions insist upon. In addition, leading private lenders such as the Kennedy Fundings of the industry are able to slash the time it takes to close a loan, from the weeks or months a traditional lender would need, to a matter of mere days. In the eyes of borrowers and brokers alike, this, along with other value-added services, more than makes up for the increase in interest.