Commercial hard money is private lending secured primarily by the asset rather than by documented income or borrower financials. It exists to solve two problems banks cannot: closing speed measured in days, and properties whose condition or vacancy puts them outside conventional underwriting entirely.
What commercial hard money is
Private, asset-based lending on commercial property. The lender's primary question is what the asset is worth and how they would recover if the plan fails — not what your tax returns show or how long the building has been leased.
The term carries baggage from an era when it meant an informal loan at punishing terms from a private individual. Today it means a professional lender, documented terms, and a rate that prices speed and condition tolerance rather than desperation.
What the premium actually buys: a bank needs a stabilised, habitable, well-documented asset and several weeks. Commercial hard money will fund a vacant building with deferred maintenance and no rent roll, in days. That capability is the product.
When it is the right tool
- Auction and short-settlement purchases where the timeline makes conventional financing impossible
- Distressed or vacant commercial assets with no income to underwrite
- Properties with condition problems that fail a conventional property condition assessment
- Note purchases and discounted payoffs requiring speed
- Partnership buyouts where one party needs to be funded out quickly
- Bank declines where the asset is sound but the borrower or documentation does not fit the box
How it is underwritten
- Asset value first. Current value, and in some structures the value after a defined improvement plan.
- Exit credibility. The lender is underwriting how they get repaid — sale, refinance, or stabilisation.
- Leverage. Conservative relative to bank lending, because the security is doing the work.
- Sponsor capability. Not credit-score driven, but a track record of completing similar projects matters.
- Liquidity. Evidence you can carry the asset through the plan, since interest accrues monthly whether the plan is on schedule or not.
What is generally not required: tax returns, a rent roll on a vacant asset, or the trailing operating statements a permanent lender would demand.
The real cost
Commercial hard money is the most expensive financing in this space, and the rate is only part of it:
- Interest — highest of the commercial products, charged monthly
- Origination points upfront, often higher than on bridge financing
- Draw fees and inspections where renovation funding is included
- Carrying costs across the full hold — taxes, insurance, utilities, security on vacant assets
- Extension costs, which on hard money can escalate sharply
- Exit fees on some facilities
The arithmetic that matters is not hard money versus a bank loan. If the bank will fund the deal, take the bank. Hard money earns its cost when the alternative is not a cheaper loan — it is not doing the deal at all.
The exit
Every commercial hard money loan needs a defined exit before it funds. The clock does not pause, and once a facility passes term the carrying cost climbs quickly — often through a default rate, penalty payments, or both.
- Refinance into bridge or permanent financing once the asset supports it
- Sale on a realistic timeline for the asset class
- Recapitalisation where equity partners take out the debt
Start the exit process well before maturity. Three lost weeks at the end of a hard money facility can erase the profit on an otherwise successful project.
Choosing a private commercial lender
- Do you lend on this asset type, in this market, at this size?
- How is value determined — your appraisal, mine, or an internal opinion?
- What leverage against current value, and is there any future funding?
- What are all the costs: rate, points, draw fees, exit fee, extension terms?
- How fast, realistically, from complete file to funding?
- What happens if the project runs past term?
- Are you the capital source, or brokering this?
Program parameters vary by lender and property type and change with market conditions. Figures here describe what is typical across the commercial and business-purpose market — they are not a quote. Send us the scenario for real numbers.
