• Commercial real estate is sometimes financed by hard-money lenders.Allan Baxter/Photodisc/Getty Images
  
  Hard-money lenders are private investors who provide capital for a variety of clients in the market for business start-up funds, short-term loans for residential real estate investments, and financing on commercial real estate. Borrowers often seek the help of hard-money lenders when banks and mortgage companies cannot help them with traditional loans. Although hard-money loans are often more expensive than conventional programs, their guidelines are often significantly more liberal, allowing borrowers to obtain specialized terms and loan amounts.
  
  

Seeking the Best Interest Rates and Payment Terms

• While the spectrum of hard-money interest rates can be quite broad, loans are generally significantly more expensive than programs offered by banks and mortgage lenders. It is not uncommon for hard-money mortgages to come with interest rates in the 10 to 20 percent range. According to Troy Schuricht of Biggerpockets.com, most hard-money lenders amortize their loans using interest-only schedules. This allows payments to remain lower than for traditional, fixed loans
  
  

Researching Initial Payment Terms

• Because hard-money loans come with specialized credit guidelines, interest rates and payment terms can be different during specific stages of financing. If you are seeking hard money for a home rehab project, some lenders will offer deferred payments while work is being done. Some programs come with interest-only payments during rehab and then covert to traditional monthly payments thereafter.
  
  

Negotiating the Lowest Closing Costs and Fees

• Because hard-money lenders are often not bound by traditional, state lending laws, some programs can come with hefty fees. Much like traditional mortgages, hard-money loans require appraisal, title insurance and hazard insurance. These fees can range from a few hundred to several thousand dollars, depending on loan amounts and lender guidelines. It is also common for lenders to charge between two and 10 points on each loan. A point represents one percent of the loan amount. Keep in mind that if your credit history is weak, you won't get the lowest fees. Schuricht notes that between two and 10 points is standard.