Hard money loans are different from standard loans in a number of different ways. These loans are issued by the AIM Funding Group or Meecorp Capital Markets, as well as by some other companies, such as institutes that lend in cooperation with the SBA, federal banks, mortgage companies, or just private investors.
A hard money loan is one that is based almost solely on using property as collateral (commercial property for businesses), rather than being based on the borrower’s credit score. The reason for this is that these loans are usually only issued to companies or individuals that have fallen on hard times and had to declare bankruptcy or had a foreclosure. There are other circumstances outside the scope of banks and normal lending institutions’ procedures, not necessarily bad, that might warrant a company to seek a hard money loan. In exchange for offering this service that most other companies are unwilling to provide, hard money loans usually have very high interest rates, around 10-16%, and can also charge fees for a number of different reasons. The lenders involved also take 1st lien status most of the time: if the borrower ends up being unable to pay the loan, they are the first to collect on the collateral. Sometimes they will yield 1st lien status, resulting in what is called a mezzanine loan.
Generally, the conditions and terms of commercial hard money loans are even worse than those for individuals. For some, getting a hard money loan may be the only available option though.
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