Hard money means lending decided by the value of an asset rather than by the borrower's financial condition, and private lending means the money comes from an individual or a fund rather than an institution. The two overlap heavily and neither is regulated in the way bank lending is, which is exactly why the terms are worth understanding before signing anything.
What is actually being underwritten
An asset, and specifically what that asset would fetch in a forced sale. A hard money lender is not modelling your cash flow, is not much interested in your credit file, and is deciding how quickly it could recover its money if you stopped paying. That makes it fast, and it makes the loan-to-value ratio the only number that really matters in the negotiation. It also means the lender is comfortable with an outcome most institutions are not: taking the asset. Go in understanding that the security is the plan rather than the backstop.
What it costs, and why
More than every other product on this site, and no lender in this record publishes a rate for anything, so the number in front of you is the only number. Expect a short term measured in months rather than years, an arrangement fee taken from the advance, interest that may be payable monthly regardless of your trading, and an exit or settlement fee. Convert every offer into a total amount repayable and a date, and then ask the question that actually decides it: what specific event repays this. Hard money with no identified exit is the most expensive way there is to postpone a problem.
When it is genuinely the right call
When speed has a value you can quantify: a discounted asset purchase that expires this week, a contract that needs plant on site by Monday, a settlement that unlocks a much larger payment. When the exit is real and dated: a property sale, a refinance already agreed, a customer payment with a contract behind it. And when the alternative is not a cheaper facility but no facility, which for a business below every published floor in this record is often the honest position. It is the wrong call for working capital, for a shortfall with no end date, and for anything a slower, cheaper lender would also do.
Questions people ask about hard money lenders for business
Do hard money lenders check credit?
Lightly, and the decision is the asset. Expect them to want a valuation, clear title and a plausible exit rather than accounts and a credit report, and expect the loan-to-value ratio to be the number that decides the size of the advance.
How much do private business lenders charge?
No lender in this record publishes a rate, and private lending is priced case by case and is the most expensive money here. Ask for the total amount repayable, the term in months, every fee including the exit fee, and what happens if the exit is late.
Is private lending regulated?
Business lending in the United States is far less regulated than consumer credit, and several states now require commercial financing disclosures. That is a reason to read the whole agreement rather than the summary, and to be certain what the security is and what happens on default.