The Difference Between Private Money Loans & Hard Money Loans

People may use the terms “hard money” and “private money” interchangeably when discussing loan options. Although there are similarities, there are also differences you should be aware of when choosing financing options.

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Both hard money and private money financing involves the use of asset equity to secure the loan. The investors are less interested in your credit situation or previous financial difficulties as long as the property has sufficient equity to secure their investment in you.

The differences lie in the structure of the lenders’ businesses. Hard money investors are organized as a business and in many states are licensed or bonded as an investment firm. The investors form these businesses to give them leverage for larger investments where a group of investors has more power to gain a favorable loan. Hard money investors like Shop Commercial Mortgage are relatively easy to find and will work promptly to get your loan approved.

Private money investors are precisely that … private. They don’t advertise, they don’t necessarily have a business, but rather are individuals who have money available and want the higher rates of return available from private lending. Private investors are very difficult to find and often won’t work with you unless you are recommended by another client.

Hard money investments are structured around a known interest rate, loan duration, points, and so forth. There is an agreement signed between the lender and borrower and the loan is carefully structured by the agreement. On the other hand, a private investor could theoretically agree to give you money based solely on a handshake without a written agreement of any kind, as unlikely as this may be.

Shop Commercial Mortgage offers hard money financing with an established investor network. We can qualify you and get your money in a matter of days versus weeks from a conventional lender. Don’t waste time trying to find private money when our hard money network is waiting to work with you Call us today at 813-368-9919 to get started!

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