Hard Money Loan vs Bridge Loan: What’s the Difference?

When searching for short-term financing for your business, you’ll probably come across hard money loans and bridge loans. In recent years, they’ve become increasingly popular alternatives to traditional bank loans. As a result, many business owners assume that hard money loans and bridge loans are the same. While similar, though, there are a few notable differences between these two short-term financing solutions.

Hard Money Loan vs Bridge Loan: What’s the Difference?

What Is a Hard Money Loan?

A hard money loan is a type of short-term, asset-based financing that’s secured by the use of real property as collateral. They are offered by private lenders, all of whom require the use of real property as collateral.

It’s also worth noting that bridge loans are designed for a specific purpose. In other words, you typically can’t use a bridge loan to cover just any expense associated with your business’s operations. Rather, you must it for the purpose outlined in the terms and conditions, which may consist of financing a new investment opportunity.

What Is a Bridge Loan?

A bridge loan, on the other hand, is any type of short-term loan that’s used to “bridge” the gap in financing. If you’re planning to obtain long-term financing one or two years down the road, a bridge loan may offer an attractive choice of financing for your business until this happens.

The Differences Between Hard Money Loans and Bridge Loans

A hard money loan can be a type of bridge loan, but it doesn’t have to be. There are several key differences between hard money loans and bridge loans.

As previously mentioned, hard money loans are offered by private lenders. In comparison, bridge loans are offered by both private lenders as well as some banks.

Additionally, the way in which hard money loans and bridge loans can be used varies. Hard money loans are designed for a specific purpose, whereas bridge loans can typically be used for any or most purposes. In this regard, bridge loans are more versatile than their hard money counterpart, as you can use them for a variety of business-related purposes.

In Conclusion

As you can see, hard money loans and bridge loans aren’t necessarily the same. After reading this, you should have a better understanding of the differences between hard money loans and bridge loans.

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