A commercial hard money loan is short-term, asset-based debt that a private lender sizes on the property's as-is value or project cost and expects to be repaid from a sale or refinance within months. It costs far more than bank debt, so the real question is whether speed is worth the premium; to see live terms, submit your deal.
Hard money is the most expensive money in commercial real estate that a sane borrower still uses on purpose, and this guide does the arithmetic.
What is a hard money loan for commercial real estate?
A hard money loan is short-term, asset-based financing secured by the property rather than underwritten mainly on the borrower's credit or income, and it comes from private funds and specialty lenders rather than banks. Loans are interest-only and sized on LTV or cost; CNBC Select puts hard money rates at 8%–15%, and closings take weeks, not months.
The defining feature is what the lender looks at. A bank underwrites the borrower, property and income through a scheduled credit committee; a hard money lender underwrites the collateral and the exit, and decides fast because the loan is small relative to the value behind it.
Common commercial uses: a short closing window, a property that cannot yet support conventional debt, a pre-stabilization value-add plan, a partnership buyout, a maturity default racing a foreclosure clock, or a title or condition problem a bank will not touch until it is cured.
How does a hard money loan work on a commercial property?
On a commercial property, a hard money lender underwrites the collateral and the exit: it sizes the loan off as-is value or project cost, funds the purchase at closing, holds renovation money back for draws, collects interest-only payments, and expects payoff from a sale or refinance within six months to a few years.
The difference from a house flip is the exit: a flip is repaid by a retail buyer, while commercial hard money is usually repaid by a lender underwriting the property's income.
Do lenders size on as-is value or on cost?
Most commercial hard money lenders test both and lend the lower result: a loan-to-value cap on the property's as-is appraised value and a loan-to-cost cap on purchase price plus renovation budget, so a value-add deal is constrained by whichever test binds first.
NerdWallet puts typical hard money LTVs at 50% to 75%; Corporate Finance Institute describes 65% to 75% of the collateral's value.
An illustrative commercial example. A vacant flex building costs $3,000,000, appraises at $3,000,000 as-is, and needs a $600,000 renovation ($3,600,000 total cost). Assume a lender advancing 65% of as-is value plus the renovation from a holdback:
| Line | Amount |
|---|---|
| Day-one advance: 65% × $3,000,000 | $1,950,000 |
| Renovation holdback | $600,000 |
| Total loan commitment | $2,550,000 |
| Loan-to-cost: $2,550,000 ÷ $3,600,000 | 70.8% |
| Borrower cash: $3,600,000 − $2,550,000 | $1,050,000 |
Sized on cost alone at an illustrative 75% LTC, the deal would support $2,700,000, so the as-is test binds.
What do hard money lenders charge?
Hard money lenders charge an interest rate that CNBC Select puts at 8%–15% for hard money generally, plus points paid at closing and often a minimum-interest guarantee or exit fee, so the all-in cost of a short hold lands well above the headline coupon a borrower compares against a bank.
The line items to price before you sign:
- Rate — fixed or SOFR-indexed, interest-only, charged on the drawn balance.
- Points — a percentage of the loan paid at closing, not refunded on early payoff; the examples here assume an illustrative 2 points.
- Minimum interest / prepayment — the guaranteed earning period, and the term borrowers miss. A 9-month minimum on a loan you repay in 4 months more than doubles your effective rate.
- Exit fee — a percentage of the balance at payoff on some programs.
- Extension options — price them, because construction and lease-up run late more often than early.
How is commercial hard money priced differently from a residential fix-and-flip loan?
Commercial hard money is priced on the income a property can eventually support and the credibility of a refinance exit, while residential fix-and-flip loans are priced on after-repair value and a retail resale, so leverage, terms and risk differ even when headline rates overlap.
CNBC Select puts hard money rates at 8%–15% overall. For flips, NerdWallet says terms typically run six to 24 months, maximum LTV is usually up to 90%, and some lenders reach 90% LTC or higher. No source cited here publishes a commercial-only rate band, so the 11% rate in this guide's examples is illustrative, not a quote. The fix-and-flip versus bridge loan comparison covers the residential side.
What is an interest reserve, and who carries the payments?
An interest reserve is money set aside inside the loan at closing to pay monthly interest while a vacant or renovating property earns too little to cover it, which means the borrower still carries the payments, just with borrowed dollars that accrue interest and count against leverage.
In the flex example, the $1,950,000 day-one balance at an illustrative 11% costs $17,875 a month ($1,950,000 × 11% ÷ 12), so a nine-month reserve is $160,875, added to the loan or funded in cash.
A SOFR-indexed payment moves with the index: SOFR was 3.85% on the 2026-09-21 observation date, after the Federal Reserve's September 16, 2026 decision to raise the federal funds target range by 1/4 percentage point to 3-3/4 to 4 percent. When the reserve runs dry, the payments come out of the borrower's pocket.
When is a hard money loan worth the premium?
A hard money loan is worth the premium when the speed or flexibility it buys captures more value than the extra interest and points cost, so price both paths on the same deal and compare the dollar difference against what closing faster actually wins.
Take a $1.2M acquisition with a $780,000 loan held nine months, at illustrative rates:
| Hard money | Bank | |
|---|---|---|
| Rate | 11.0% | 7.5% |
| Interest, 9 months | $64,350 | $43,875 |
| Points | 2.0% = $15,600 | 1.0% = $7,800 |
| Total cost of capital | $79,950 | $51,675 |
The premium for speed is $28,275.
That number is the whole decision. Hard money is rational if — and only if — closing in two weeks instead of ten captures more than $28,275 of value. Three situations where it plainly does:
- A seller discount for certainty. If a two-week close wins the property at $60,000 under the price a financed buyer would pay, the premium bought $60,000 for $28,275.
- A deal you would otherwise lose entirely. If the alternative is not a slower close but no deal, the comparison is not $79,950 against $51,675 — it is $79,950 against zero return on the whole opportunity.
- A clock you cannot move. A maturing loan, a 1031 exchange deadline, or a foreclosure sale date does not care that a bank is cheaper.
And where it plainly does not: a stabilized property with clean financials, no deadline, and a willing bank. Paying $28,275 to beat a deadline that does not exist just buys the same asset expensively.
What do hard money lenders actually require?
Hard money lenders require less paperwork than a bank but still ask for a valuation, title commitment, insurance, an entity borrower backed by a personal guaranty, and above all a credible, documented exit: a sale contract, a refinance takeout, or a dated business plan.
The entity and guaranty ask. Expect a single-purpose LLC borrower, principals signing a personal guaranty that is often full recourse, and a completion guaranty on renovations.
Cross-collateralization. If the deal alone is short of the leverage limit, the lender may take a lien on a second property you own, tying both assets to one default; negotiate a release price up front.
Personal income documentation matters less than borrowers expect; liquidity to carry the loan and experience with the specific business plan matter more.
How do you exit a commercial hard money loan?
You exit a commercial hard money loan by selling the property or refinancing into longer-term bank, agency or DSCR debt, and a refinance only works once the property has the income, occupancy and ownership history (seasoning) the takeout lender requires, so the exit must be underwritten before the hard money closes.
- Bank: sized on stabilized income; the prime rate was 7.00% on the 2026-09-18 observation date.
- Agency: multifamily moves to Fannie Mae or Freddie Mac debt once occupancy meets agency standards.
- DSCR: smaller rentals refinance into a DSCR loan sized on rent coverage.
- Sale: no takeout underwriting, but exposed to the market at maturity.
Seasoning is the gate borrowers underestimate: many takeout lenders use a new appraised value only after a set ownership period (six to twelve months, illustratively). In the flex example, a $2,550,000 payoff at an illustrative 65% refinance LTV needs a stabilized appraisal of about $3.92 million ($2,550,000 ÷ 0.65). Fixed-rate takeouts price over Treasuries: the 5-year was 4.86% and the 10-year 5.01% on the 2026-09-18 observation date.
How do you find the right hard money lender?
Program criteria vary widely — minimum loan size, property types, whether they lend on vacant or non-cash-flowing assets, geographic footprint, and appetite that moves quarterly. Matching a packaged deal against current criteria beats calling down a list, because most rejections are program mismatches rather than deal problems.
YieldStack is a commercial mortgage brokerage, not a lender: one pre-screened submission is matched against hard money, bridge and other short-term programs. Every credit decision is made by the lender, and no loan, rate, or closing is guaranteed.
- Upfront cost: Zero upfront — it costs nothing to submit a deal and review offers.
- Broker fee: 0.50–1.00% of the loan amount, paid only at closing.
- Speed: median offer in under an hour, from an institutional lender.
- Matching: 5–8 matched lenders per deal, drawn from 20,000+ loan programs.
So when should you use commercial hard money?
Use commercial hard money when a fast, asset-based close wins a discount, saves a deal, or beats a fixed deadline, and when the exit into a sale or longer-term refinance is already underwritten; on the illustrative $780,000 nine-month loan above, speed has to be worth more than the $28,275 premium over a bank.
Submit your deal at YieldStack. Zero upfront — 0.50–1.00% of the loan amount, paid only at closing.