Securing a business loan can be quite a hurdle for new businesses and startups, particularly without an established business credit. A hard money business loan might be the perfect solution for investors who need capital for a startup business and find traditional lenders inaccessible.

In this guide, we’ll explore all the essential details about hard money business loans and how you can qualify for this type of financing.

What are Hard Money Real Estate Loans?

Hard money business loans involve using a business’s property as collateral to obtain funding quickly. Unlike traditional business loans that scrutinize your business’s longevity, credit score, or revenue, hard money business loans primarily focus on the value of the collateral property.

At Infinity Capital Finance, we often see hard money business loans used for purchasing, constructing, renovating, or refinancing properties intended for commercial purposes. However, these loans typically come with higher interest rates and shorter repayment periods.

If a business defaults on the loan, the lender can seize the property used as collateral.

How Hard Money Business Loans Work

Hard money business loans offer businesses quick access to financing using property as collateral. The process begins with the business applying for a loan with a hard money lender, who evaluates the property’s value and other factors. The lender then determines the loan-to-value (LTV) ratio to decide how much they can lend.

If the valuation is satisfactory, the lender offers loan terms, which usually include higher interest rates and shorter repayment periods than traditional loans. Upon agreement, the funds are rapidly disbursed to the borrower.

The business must repay the loan within the agreed timeframe. Failure to do so allows the lender to seize the collateral property to recover the owed amount.

Hard Money Business Loans vs. Traditional Business Loans

Here are some key differences between hard money business loans and traditional business loans:

	Traditional Business Loans	Hard Money Business Loans
Lending Criteria	Creditworthiness, business history	Value of collateral property
Approval Speed	Can take weeks or longer	Fast, often within days
Interest Rates	Generally lower	Generally higher
Repayment Terms	Longer-term, several years	Short-term, a few months to a few years
Loan Amount	Based on credit, revenue, and other factors	Based primarily on property value
Credit Requirements	Minimum credit score required	Credit score is less important, focus on collateral
Risk to the Borrower	Lower; longer terms, lower rates	Higher; potential loss of property

Advantages of Hard Money Business Loans

• Fast Approval and Funding: Businesses can secure financing within days, which is crucial for time-sensitive investments or expenses.
• Less Focus on Credit Requirements: Lenders primarily consider the value of the collateral rather than the borrower’s credit score, making it easier for businesses with poor credit or limited financial records to obtain financing.
• Flexibility: Hard money loans often come with more flexible terms negotiated between the lender and borrower.
• Collateral-Based Loan Amount: The loan amount is based on the property value, not on the business’s revenue or profitability.

Alternatives to Hard Money Business Loans

Depending on your needs, here are some alternatives:

• Business Lines of Credit: Functions like a credit card; you only pay interest on the amount used.
• SBA Loans: Small Business Administration loans are backed by the federal government and can be used for various business needs.
• Equipment Financing: Loans specifically for purchasing equipment, with the equipment often used as collateral.
• Peer-to-Peer Lending: Online platforms connect businesses with private investors for loans.
• Venture Debt: Financing for early-stage companies without a steady income, often used alongside equity fundraising.

How to Qualify for a Hard Money Business Loan

Hard money business loans typically do not require a high credit score. If you have a valuable property to offer as collateral, hard money lenders might be willing to provide the funds needed to kickstart your business venture.

Partner with Infinity Capital Finance

Securing a hard money loan can be a strategic move to quickly access capital for growth and opportunities. Whether you’re expanding operations, purchasing equipment, or managing cash flow gaps, choosing the right lender is vital.

At Infinity Capital Finance, we offer competitive rates, flexible terms, and personalized guidance to ensure the financing aligns with your business objectives. Contact us to learn more about our lending process and fill out our initial loan application today!