Hard money lenders provide loans based on the property you put up to secure the loans. They are hard and fast loans because you get cold, hard cash fast, usually in only a few minutes to an hour. These types of loans can make you or break you, so you need to know how to use them properly. The following are examples where "hard money" loans can save you, and how to avoid having them break you.
You Need a Lawyer
Regardless of whether you need a lawyer personally, or your company needs legal representation, this is definitely one example where a hard money loan can save you. Retainers for most lawyers will run you a couple thousand dollars or more, and almost no one has that kind of cash just laying around. Your business, your house, or your car may be adequate enough to secure the loan and get the cash to the lawyer (or bail bondsperson) quicker.
Your Company Looks Like It Is Missing Several Thousand in Assets
Embezzlement accusations can be a real problem for your company if assets suddenly go missing and an accountant is going to report your company for white collar crime. You can keep the problem under control by putting the assets back with a loan and then conducting an internal investigation into where the assets went.
You Need Some Working Capital Because Your Accounts Receivable Are Low
Sometimes your customers just do not pay their bills on time. Then your accounts are low, you cannot pay your bills or your employees and it avalanches from there. A short-term hard money loan can get you over the hump. Just make sure you pay it back when your accounts receivable start filtering in.
Avoiding the Pitfalls of These Loans
All loans and lending have drawbacks for borrowers. Hard money loans are almost always short-term loans with high interest rates, which is why it behooves you to repay them doubly quick. Another pitfall borrowers make is borrowing in excess of what they actually need. That is almost always financial suicide, since you will probably not be able to pay the loan back as quickly as you thought, business may sour or slow, and/or you do not pay the loan in full by the contracted deadline. Only borrow exactly what you need to get past the emergency and then pay it back quickly to avoid large sums of interest or legal action.