The terms ‘hard money‘ and ‘bridge loans‘ are pretty common to our industry. In fact, hard money loans and bridge loans are often seen as the same thing by our clients. For our purposes as a lender, they are pretty much the same. But when you get right down to the strictest dictionary definitions, the two types of loans are not identical.
Hard money and bridge loans are very similar from the real estate investor’s perspective. But there are a few subtleties that make the two types of loans different. None of this may matter to you just as long as you have access to the funding you need to reach your financial objectives. But if you are interested in the details, keep reading.
As you read, remember that Actium Partners offers both hard money and bridge loans in Utah, Colorado, and Idaho. Our specialty is commercial real estate. If you are looking for funding and speed is important to you, consider Actium Partners.
Hard Money and Bridge Loan Basics
The most basic difference between hard money and bridge loans is source. All hard money loans are private loans made by individuals and firms like Actium. Banks and credit unions do not make hard money loans. Furthermore, hard money loans are never used as residential mortgages.
A bridge loan is slightly different. Hard money lenders offer bridge loans for real estate investments and other needs. However, traditional financial institutions also offer bridge loans for certain types of needs. The best way to understand this particular difference is to think of it this way: where nearly all hard money lenders offer both hard money and bridge loans, traditional financial institutions only offer bridge loans. They do not offer hard money.
Loan Intent
Hard money in bridge loans also differs slightly in terms of intent. By the strictest interpretation, a hard money loan could be put to use in any way a borrower and lender agree on. Here at Actium Partners, our hard money loans are for real estate investments. Occasionally we will assist a business looking to use hard money to expand operations.
Bridge loans are more specific in the sense that they are intended to bridge the gap between an immediate financial need and a future source of funding. You could say that all bridge loans from private lenders are hard money loans. And yet, not all hard money loans are bridge loans.
Similarities Between Them
The need for a post like this lies in the similarities between the two types of loans. There are three similarities in particular:
- Asset-Secured – Both hard money and bridge loans are secured by assets. For our purposes as a lender, we typically leverage the property being acquired by an investor as security on the loan. The property is an asset offered by the investor as collateral.
- Short Terms – Both hard money and bridge loans are short term loans. Bridge loans can be as short as 6 months while most hard money loans have terms of no more than 24 months.
- Loan Structure – Lenders tend to have quite a bit of flexibility in how they structure hard money and bridge loans. Private lenders are more flexible, being able to customize loans to meet unique borrowing needs.
If you are inclined to use the terms ‘hard money’ and ‘bridge loans’ interchangeably, no one will think any less of you. The two types of financing are so similar that it is sometimes hard to tell the difference. Technically, they are not identical. But as long as you get the financing you need, does it matter?
