Are Hard Money Loans Right For Your Small Business?

Before you apply for a loan determine if a HARD MONEY LOAN is the right option your small business.


Have you watched the Shark Tank? Inventers, entrepreneurs and small business owners stand in front of a panel of rich sharks and for ask money. Usually these owners are asking for money in exchange for a percentage of their business. Sometimes these business owners want the mentoring, name recognition and connections of these sharks but much of the time they just need an infusion of money to take their business to the next level.

When they do get a shark to bite after the due diligence is completed most get an infusion of hard cash, no interest, just equity. This is one way to get the money you need to build your business.

Most business owners will never get to the Shark Tank but many businesses need that same infusion of cash and frequently they do not want to give up any equity. Though hard money loans are not cheap, sometimes they might be the right choice to benefit you and your business.

Hard Money Loan Basics

When you are choosing a Hard Money Loan you want to understand that interest rates will usually range in the two digit numbers and are meant to look scary.  However, a hard money loan can quickly infuse needed cash into your business; usually only for a few months. Hard money lenders will usually approve loans within a matter of days.  Typically, loans can range from $5,000 to $500,000 with very limited documentation.

Some common reasons for using a hard money lender:  meeting payroll, hiring additional staff, purchasing new material or inventory, purchasing equipment, expanding facilities, or new business opportunities.

Lenders will not fund your loan if they do not feel secure with and understand your cash flow.  To avoid this disconcerting situation, do some homework before you apply for any business loan.

Key action items to consider before applying:

1.     Business type:  It is important to work with lenders that have funded previous businesses in your industry.  Request specific examples and get their success stories.

2.     Credit:  How do they look at your personal credit?  Many hard money lenders will not focus as much on personal credit as they do on revenue and cash flow.  Therefore, understand their guidelines on credit before they start pulling your credit report.  Each hard pull does have a negative impact on your score. Banks and legitimate lenders will always evaluate the entire creditworthiness and business picture before funding a loan.

3.     Terms:  Make sure you are aware of the terms of the agreement.  Many hard money loans are short term and expensive, with high interest rates.  Find out if there is a pre-payment penalty to pay the loan off early.

4.     Fees:  Legitimate lender fees should be disclosed clearly and prominently.   Be always on the lookout for any hidden fees or costs. Ask the lenders to provide you with the overall costs and monthly payment.  Always know what you are signing.  If you are not sure, have your attorney review the documentation.

If you are considering a Hard Money Loan consider these next steps:

1.     Review your finances with your accountant.  It’s important to know where your business stands, especially if you are seeking out capital.  It is extremely important that you know how and when you can pay off this loan.

2.     Get all necessary information from the lender.  Don’t be afraid to ask any and all questions from your lender.  Lenders need to provide you with all the details you request so that you can make the right decision for you and your business.  Even if you think the question is not important or irrelevant, ask anyways.  You don’t want to learn an expensive lesson.

3.     Make sure that the hard money loan makes sense and that you are comfortable with the repayment terms.  Understand all the repayment terms.  Ask worst-case scenarios.  Find out what will happen if you don’t repay the loan back within the terms that have been set.

4.     Create a plan and commit to it.

5.    Speak to a specialist that can provide you more information at no cost to you: Hard Money Loan Specialist


Elizabeth Karwowski
Elizabeth Karwowski
Elizabeth Karwowski founded Get Credit Healthy, Inc., a consumer advocate organization to help individuals get back on the right path to credit health. She has obtained her FICO & Fair Credit Reporting Act certification. As a recognized credit expert, Elizabeth has been featured on NBC and Fox News, published in Scotsman’s Guide, Today’s Chicago Women and other print media. Over time, she has helped countless individuals restore their credit. She is an active SCORE counselor and a board member for the City of Miami Beach Success University.   Elizabeth Karwowski was formerly the President and CEO of Trust One Mortgage Corporation. After Graduating from Northern Illinois University with honors, Elizabeth worked for Ernst & Young LLC and RSM McGladrey as part of the consulting team. Website

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