What is Hard Money?

Aside from bank lending, many private capital corporations, life insurance companies, pension fund companies, etc are in the business of lending commercial mortgage loans. You'll find that this secondary group of lenders, while they have more lenient requirements than a bank, do require that the property's income be able to service its debts.

The debt coverage service ratio required from this group of lenders is almost always 1.1 and greater. Some of these lenders will allow borrowers to combine other sources of income when analyzing their income. However, there is another group of borrowers who cannot demonstrate that their property's income is servicing its debts.

In that case, private investors or "hard" money can be used. Instead of analyzing the property's cash flow, hard money lenders look at the property's quick sale value. However, any time their is an increased risk associated with the loan, you can expect to pay more. Loan points and fees and interest rates are considerably higher for these loans. Hard money lenders also offer lower loan-to-value (LTV) ratios than banks and other institutional lenders, usually maxing out at 60% of the property's value.

When your property does not meet the requirements for a commercial mortgage bank loan and cannot show income, contact All Access Loans, a commercial mortgage broker.