Private Money Lenders VS. Commercial Hard Money Lenders

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Private Money Lenders VS. Commercial Hard Money Lenders

We know that commercial hard money lenders aren’t banks or other traditional institutions that are in the business of loans, but are they private money lenders? Moreover, if hard money lenders are not private money lenders, then you may just be asking yourself, well who are they?

There are often so many interchangeable terms when it comes to the world of commercial lending that it is easy to forget that not all interchangeable terms always mean the same thing. For instance, it is not uncommon to hear the phrase private money lenders and naturally think non-bank lenders. Moreover, when people think of commercial hard money lenders, they are also inclined to think non-bank lenders. Are you confused yet? Well, it is okay if you are because you are definitely not alone.

The reality is both private money lenders and commercial hard money lenders are traditionally not banks. But, that doesn’t mean that both of these non-bank lenders are the same nor do they offer the same loan options. So, now that that’s a little clearer, let’s go over just how these two particular commercial money lenders are different.

For starters, you will learn very quickly that hard money loans meet a very specific need. For example, let’s say you are a house flipper or a commercial developer and you need quick, short-term financing without a lot of red tape. These two instances are generally when you want a hard money loan. In fact, these instances really make up the bulk of hard money loans. Moreover, it is because of this fact that hard money lenders appeal to a certain niche market. Private money lenders, on the other hand, are more relationship-based and offer loans for real estate transactions—plain and simple. In other words, there really are not any specific scenarios where you absolutely need to contact a private money lender to provide financing rather private money lenders are basically just another non-bank financing outlet.

Understand the Differences

To truly understand the differences between these two money lenders, you have to understand how they each operate. For instance, private money lenders lend short-term financing at a premium based on a combination factors such as the borrowers background, the quality of securing property and likelihood of repayment. Hard money lenders offer short-term financing at a much higher premium based upon securing asset value. Thus, the real difference between these lenders is not only in how they operate (agenda, post-closing flexibility, etc.) but also what they focus on (philosophy, property, and location).

Things to consider when choosing Between the Two

Ultimately, it is clear that private money lenders and hard money lenders are different in a lot of ways. But, they both offer the required, creativity (example: loans with prepaid interests), simplicity (not regulated by banking policies) and quick turnaround time i.e. quick cash that most commercial borrowers need. Nevertheless, now you can say with certainty that you know the difference between these two lenders, which in the long run should make it much easy to decide which particular kind of money lender is right for you.

Dennis Dahlberg


Level 4 Funding LLC
Arizona Tel:  (623) 582-4444

Texas Tel:      (512) 516-1177

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027

111 Congress Ave |Austin | Texas | 78701    

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About the author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true.

Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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