Hard Money Loan vs Bridge Loan: Understand 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 loans are considered loans of “last resort” or short-term bridge loans. These loans are primarily used in real estate transactions, with the lender generally being individuals or companies and not banks

What’s Hard Money Loan And Bridge Loans?

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 use it for the purpose outlined in the terms and conditions, which may consist of financing a new investment opportunity.

Conversely, a bridge loan 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.

What’s The Difference?

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. For example, VFD Bridge which started operations in 2011, offers tailored personal financial advisory services that help borrowers plan for future expenses, save for specific outcomes, finance asset acquisitions, and more.

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.

My Take: Are you looking for an alternative source of finance for short-term needs to help you plan for future expenses, save for specific events, acquired assets, and many more? Look no farther as Bridge Loan is considered the best option or advisable.

 

For more information on startup and business funding, or to complete a funding application, please visit our website.

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