These 5 Loans a Hard Money Lender Won’t Fund

Hard money loans have become a popular financing option for real estate properties, particularly among investors and business owners who require urgent funding. This type of loan typically relies on asset-based loan financing, where borrowers secure funds by leveraging the value of their real estate.

Unlike traditional methods, hard money loans are generally issued by private investors or companies, resulting in higher interest rates compared to conventional financing options.

Hard money loans are typically sought after when borrowers are unable to secure sufficient financing from traditional banking institutions. They are commonly used for short-term projects, lasting from a few months to a couple of years.

However, eligibility criteria may vary depending on the borrower’s situation and the lender. In general, most hard money lenders in Dallas, TX, evaluate loans based on the value of the real estate property, making it the primary guideline for loan evaluation.

Professionals offering hard money loans typically assess the property’s risk and its current value before considering all the essential criteria to determine if the loan can benefit them.

Although hard money lenders provide a valuable financing option, there are some types of loans they typically don’t offer. Here are the top five examples of loans you are unlikely to receive from a hard money lender.

Types of hard money loans that the lender can never offer

100 ltv hard money lenders

When considering hard money loans, there are several circumstances under which a lender may decline to provide financing. However, here are some of the most common loan types that hard money lenders typically offer.

Loan against soft assets

Obtaining hard money loans involves securing the funding against hard assets, which are tangible and can be physically possessed, such as real estate property. The term “hard money” refers to the lender holding the asset as collateral while providing the necessary funds for the project. On the other hand, intangible assets like patents or stocks are considered “soft assets,” and hard money lenders typically do not provide funds against them.

Hard money lenders are known to provide funding against hard assets, such as physical assets like real estate property. On the other hand, soft assets, such as patents or stocks, are considered intangible and are not accepted as collateral. Thus, hard money lenders usually avoid private equity, seed capital, and startup financing since they involve soft assets as collateral.

Although there is significant demand for private equity funding, hard money lenders decline such requests due to the lack of a physical asset as collateral. It is important to note that hard money lenders in Illinois generally offer debt financing and not equity financing.

Loans with no exit strategy

Investors seeking hard money loans must have a solid exit strategy in place to qualify for the financing. The reason is, hard money loans are short-term, high-interest rate loans, and the lender requires a clear understanding of how the borrower plans to pay back the debt. The lender will evaluate the exit strategy before approving the loan to ensure that the borrower has a feasible plan in place to repay the debt.

If the borrower fails to provide a viable exit strategy, the hard money lender will decline the funding request. Therefore, the borrower must have a well-thought-out exit plan to secure hard money financing.

100% LTV loans

Debunking the myth of 100% LTV loans from hard money lenders, it’s a common misunderstanding that these lenders offer financing at 100% loan to value. However, the truth is that hard money lender are more conservative in evaluating the property’s value than traditional lenders. While government-backed loans may require no money down, hard money lenders often require a larger down payment than conventional financing options. Hence, it’s unlikely to find hard money lenders who offer 100% LTV loans.

Fix and flip projects are excluded from the lenders who offer to finance for the improved or future value of the property. Although hard money lenders may approve the loan, they will only offer a certain percentage of the total approved amount due to the higher risk associated with such projects. Unlike traditional banks that assess the borrower’s creditworthiness based on tax returns, hard money lenders evaluate the assets put up as collateral for loan repayment. This makes hard money loans an attractive option for borrowers who may not qualify for traditional loans based on their credit history.


Hard money lenders cannot offer funding based solely on a borrower’s dream, no matter how inspiring it may be. To approve a loan, lenders assess the 3 C’s: cash, collateral, and character. Collateral is the obvious factor, while cash refers to the amount the borrower can invest in a property or has already invested in real estate.

Character refers to the borrower’s credibility, including creditworthiness, experience, and track record. Hard money lenders prioritize these factors over a borrower’s dream or aspirations, ensuring they are making a sound investment with a high likelihood of repayment.

When it comes to hard money lending, the borrower’s 3 C’s play a crucial role in loan approval. These include cash, collateral, and character. While collateral is self-explanatory, cash refers to the amount the borrower can invest in purchasing the property or the cash already put into the real estate. Character refers to the borrower’s track record or experience with a specific property type.

For instance, a borrower with limited cash but good collateral and character in the form of previous experience with the property type can secure financing. On the other hand, a borrower with good collateral but no cash or experience may still get approved for a loan based on the collateral offered.

Consumer loans

Consumer loans are meant for personal or household purposes, with residential properties being classified as consumer assets. However, new regulations and disclosure requirements for mortgage lending have made the process complex, causing banks to shift their attention away from mortgages to explore other types of consumer debts.

When borrowers don’t qualify for traditional loans due to lending laws, they often look for alternative options for their home loans. However, they quickly find that hard money lenders offer very few options.

Since residential property falls under consumer loans, hard money lenders cannot provide this type of loan. Private lenders are overwhelmed by the licensing and regulatory requirements that come with consumer loans. With limited resources, they are unable to meet the necessary criteria and purpose.


Hard money loans are a popular choice for investors or businessmen seeking quick financing. However, there are scenarios when lenders may refuse to offer the loan, so it’s crucial to prepare yourself with other financing options. Private Capital Investors can assist you in finding the right funding solution for your real estate investments. With years of experience, our team can provide the best deals and offers to help you succeed.

We understand the significance of hard money loans and the challenges you may face while securing them. Our team of experts is here to guide you through the application process and improve your chances of getting approved.

In case your application is rejected, we won’t leave you stranded. We’ll work with you to explore alternative financing options that align with your specific needs. Don’t shy away from seeking our assistance; we’re committed to helping you secure the necessary loan and make your investment successful.

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