As a small business owner, it’s essential to know where you’re going to get financing for your next project. While traditional lenders are preferable, it’s not always possible to get the funding you need.

Private money lenders, also sometimes called hard money lenders, are non-bank individuals and companies that can provide relatively short-term loans to small business owners—typically in real estate, but some lenders also provide various commercial loans. 

Private money lenders may not be able to give you as favorable terms as traditional business or mortgage lenders, but they may be worth considering if your options are limited. A good business credit score can help expand your horizons in financing.

Getting small business loans takes a lot out of business owners, from a bank or elsewhere.

How Does a Hard Money or Private Money Lender Loan Work? 

Private money lending or a hard money loan is the practice of getting a loan from private investors, which can include friends or relatives as well as private companies. These loans are usually used for commercial property or residential real estate investment, although they can also be used for personal loans and start up business loans. They’re also usually short-term loans, which means they have to be repaid quickly, usually within a year or two. 

A small business might consider private money when they can’t qualify for a loan from a conventional lender or can’t secure a conventional mortgage for their property. This could be because they’re a first-time real estate investor or don’t have particularly good credit, making traditional financing difficult. 

You can get a hard money or private money loan from an individual investor or a lending company without having a business history or good business credit scores. But beware: these loans tend to come with short repayment terms and pretty steep interest rates. 

What Are the Interest Rates on Hard Money Business Loans?

Hard money business loans are known for higher interest rates, usually ranging from 10% to 18%. Conventional investment mortgage rates can be as low at 1.176% to as high as 12%, so you can see why those would be more attractive to a real estate investor.

What is an Example of a Private Lender Business Loan? 

Private loans tend to be used by real estate investors to buy properties that need repairs, fix them up, and resell them for a profit. In this instance, the lender will usually cover up to 90% of the cost of the house, and the loan recipient will have to come up with the rest of the money on their own. Also, the loan recipient will use the proceeds from the property sale to pay off the loan in full, which is why the repayment terms tend to be so short. 

But hard money can also come into play if a business can’t get traditional funding, which is often the case for startups or new businesses. Family members, friends, angel investors, and venture capitalist companies are all examples of private lenders.

Private Lenders for Business Startup Loans

If you’re looking for a list of private lenders for your business-related financing needs, here are some of the top companies to consider.

If you’re looking for a list of private lenders for real estate or other business-related needs, here are some of the top companies to consider.

AMZA Capital

AMZA Capital operates in all 50 states, making it a solid choice if you don’t live in a state where one of our other top private money lenders operate. The lender focuses more on small business lending than real estate lending, although it does provide commercial real estate loans and financing if you’re looking to fix and flip a home or rent to own. Other loan options include:

• Accounts receivable
• Business term loans
• Consumer finance
• Equipment financing
• Franchise financing
• Healthcare financing
• Merchant cash advance
• Purchase order financing
• Small business loan, SBA
• Stated income loans
• Unsecured lines of credit

Loan terms and eligibility requirements can vary depending on the loan you choose. For a fix-and-flip or rent-to-own loan, for instance, you’ll need at least a 600 credit score, and you can borrow up to 80% of the cost of the investment property. The repayment term can be as long as 24 months, and interest rates are fixed, though the lender doesn’t disclose rate ranges.

For business term loans, you can qualify with a 660 credit score and two years in business. You can borrow between $20,000 and $500,000, and repayment terms range from one to four years. Note, however, that AMZA Capital doesn’t provide this kind of financing to business owners in Nevada, North Dakota or South Dakota. Also, it doesn’t provide loans to businesses in certain industries.

To apply, you’ll need to call for a consultation or provide some information on AMZA Capital’s website so a loan specialist can call you. 

LendingOne

LendingOne offers real estate loans in 45 states, excluding Alaska, Nevada, North Dakota, South Dakota and Utah. The lender offers a variety of financing options, including:

• Fix-and-flip loans
• Rental loans
• Portfolio rental loans
• Multifamily bridge loans
• New construction loans
• Fix-to-rent loans
• Pre-approval loans

To give you an idea of what to expect with loan terms, the lender provides some information on its website for a couple of its loan options:

• Fix-and-flip loans: You can borrow up to 90% of the purchase and rehabilitation costs, with loans ranging from $75,000 to $4 million. The loan repayment term can be as long as 12 months, and interest rates range from 7.49% to 13.90%, depending on your creditworthiness and the loan terms. 
• Rental loans: The maximum loan-to-value ratio is 80% for single-family properties with one to four units. Interest rates range from 5.39% to 9.90%, and the loan is amortized over 30 years.

If you’re looking for one of these or another type of loan that LendingOne offers, you can get pre-approved through the lender’s website in just a few minutes. There’s no cost, and you don’t even need to have a property in mind yet. If you are pre-approved, you can use it as proof of funds when you do find something.

Do Hard Money

Do Hard Money is unique in that it offers up to 100% financing with many of its loans. That includes the purchase, rehabilitation costs, points, interest and closing costs once you become a member of the lender’s Find-Fund-Flip System. You can qualify with poor credit and no prior experience.

The lender offers several different loan types, including:

• Hard money loans for bad credit
• Residential rehab loans
• Fix-and-flip loans
• Foreclosure loans
• Private money loans
• Rental property loans
• Refinance loans
• New construction loans

The lender offers these loans in 31 states and the District of Columbia. Loans are not available in Alaska, Arizona, California, Florida, Hawaii, Idaho, Maine, Minnesota, Montana, Nebraska, Nevada, New York, North Dakota, Oregon, South Dakota, Tennessee, Utah, Vermont and West Virginia.

Here’s what to know about some of the loan terms:

• Residential rehab loans: Only available for single-family residences of 900 square feet or more. You can borrow up to $250,000—that’s up to 100% of the purchase price and rehabilitation costs—with rehab costs amounting to no more than $75,000. 
• Fix-and-flip loans: You can get 100% financing, as long as the total doesn’t exceed $250,000. Repayment terms range from five to 12 months, and interest rates start at 7.99%. There’s also an origination fee of 2 to 6.5 points. 
• Refinance loans: If you fast access to cash, you can refinance a loan on one of your existing properties. You can borrow up to $250,000 and repay it over five months. The origination points amount to 5.5%, and the interest rate is 1.25% per month. You can get up to 100% financing. 

If you want to apply for a loan with Do Hard Money, you can do so through the lender’s website in just a handful of minutes.

LendingHome

LendingHome provides bridge loans in 26 states (check to see if yours is included). You can borrow up to 90% of the total purchase price and 100% of the rehabilitation costs. Interest rates start at 7.75% (8.25% with rehab), but the lender states that they’re typically between 9% and 12%. 

You can work with LendingHome regardless of how experienced you are with flipping houses, but if you’re new, the maximum loan-to-value ratio on the purchase price is 85%. 

Also, depending on your flipping experience, you may qualify for the lender’s preferred program, which offers to close your loans in as little as five days with no appraisal required. The lender is especially worth considering if you’re eligible for the LendingHome preferred program—you need to have flipped four or more homes in the last two years to qualify.

If you’re interested in borrowing from LendingHome, you can get a personalized rate through the lender’s website. 

Private Money Utah

While Private Money Utah is based in Utah, it offers loans in 14 states, the District of Columbia and Chicago. Eligible states include Arizona, Colorado, Florida, Georgia, Hawaii, Maryland, Nevada, New Jersey, New York, Oregon, Texas, Utah, Virginia and Washington.

Loan programs include:

• Residential rehab loans
• Residential bridge loans
• Commercial bridge loans
• Land loans
• New construction loans

You don’t need a credit check to get approved, and you can even qualify with a past bankruptcy, short sale or foreclosure. Loan terms can range depending on what you need for your business and which loan program you apply for. Here are some examples of what to expect:

• Residential bridge loans: You can borrow up to 90% of the purchase price of the home (or up to 65% if you’re refinancing), with loan terms ranging from 12 to 30 months. Interest rates range from 8.5% to 12.5%, and there’s a loan fee of 2 to 3 points. 
• Commercial bridge loans: In most cases, the terms are the same as residential bridge loans, with just a couple of exceptions. For starters, you can only finance up to 75% of the purchase price of the property, and interest rates range from 8.5% to 12%. 
• Residential rehab loans: If you’re looking to fix and flip, you can borrow between $50,000 and $1 million, up to 65% of the after repair value (ARV). Interest rates range from 12% to 13%, and the loan fee can be 2 to 4 points based on the loan size. Repayment terms go as high as 12 months.

If you want to borrow with Private Money Utah, you can start the pre-approval process over the phone or through the lender’s website.

Which Private Money Lender Should You Choose?

If you’re looking for a hard money loan, these lenders can provide you with competitive terms and a wide selection of options. The right one for you depends on a few things, including where you live, what type of loan you’re looking for, and what terms you can qualify for with each.

As with any other credit decision, it’s important to look at several options before settling on one. Consider going through the pre-approval process with a few private money lenders in your state to see how the terms compare. Then pick the one that provides the best fit at the lowest rate.

The Bottom Line: Private Lending or Hard Money for Small Businesses

A private loan or hard money can be an option for a first-time business owner or any other small business owner with bad credit, although the short-term repayment plans and high interest rates may be a reason not to go this route. You may also consider business credit cards, which can be easier to qualify for and have more favorable terms. You can find out which financing options you are more likely to qualify for using Nav — just sign up to see your options.