Hard money loans have become a common financing option in real estate, often referred to as bridge loans, asset-based loans, private money loans, or private capital loans. These loans are typically used when traditional banks or institutional lenders are unwilling or unable to provide the necessary commercial real estate loan.

A hard money loan is a short-term, asset-based loan primarily used in real estate transactions when traditional mortgages are not an option. These types of loans are funded by private investors and are secured by the property being purchased. Hard money loans typically have higher interest rates and shorter repayment terms but provide fast access to capital, making them useful for real estate investors, house flippers, and borrowers who need quick financing or do not qualify for conventional loans.

One question that often goes unasked is: Where does the money for hard money loans come from?

Here we will explore the most common sources of capital behind hard money loans and which one may be the best fit for your real estate investment needs.

Sources of Hard Money Loans

Private Individuals

Private investors seeking alternative investments use their own funds to fund real estate secured loans in their local area. These private lenders typically fund loans from $50,000 to $500,000, though some may offer larger amounts. However, investing independently requires significant effort. The private investor must handle every aspect of the process, including finding potential borrowers, conducting due diligence, assessing the investment property’s value, negotiating loan terms, and managing legal documentation. Once the loan is closed, they are also responsible for ongoing loan servicing, such as collecting payments, monitoring borrower compliance, and addressing potential defaults or foreclosures.

While the potential for financial gain is significant, mistakes can be costly for individual investors managing this on the side.

Local and Regional Mortgage Investment Funds

Local and regional mortgage investment funds focus on lending as their primary business, often funding loans up to $5,000,000 or more. As lending professionals, their regional focus can provide faster approvals and more flexible terms compared to traditional lenders, but loan costs and conditions can vary significantly depending on the company.

These funds operate under different models—some pool capital from investors seeking higher returns, while others use their own capital or institutional backing to fund loans. Borrowers may find the quicker turnaround times and less rigid requirements appealing, but it’s important to carefully evaluate the terms and fees involved. While these lenders can offer convenient financing solutions, the cost of borrowing is often higher, and not all companies provide the same level of transparency or service.

The Leveraged Lending Company

This type of company has financially sound principals who are able to set up lines of credit with other lenders to leverage their lending capital. Typically these lenders will fund up to 50% of the amount of the loan using their own capital while the bank puts up the other 50%. In the past, these companies were the most common source of funding for hard money loans.

However, banks have become more wary of these leveraged types of hard money lending companies and lines of credit are in short supply. Many companies faced liquidity issues during the 2008–2010 recession, prompting banks to tighten credit lines for leveraged lenders.

The Non-Leveraged Professional Lending Company

There are relatively few non-leveraged professional lending companies that offer alternative investment management by pooling funds from accredited investors. In these companies, accredited investors participate as limited partners, while the principals—experienced professionals in the hard money lending industry—serve as general partners, overseeing loan origination, underwriting, and servicing. This structure allows investors to gain exposure to hard money lending returns without being directly involved in loan management or borrower relations.

Many of these companies prefer the lower-risk, non-leveraged business model to protect investor funds and maintain stability, even during market downturns. By avoiding leverage, these firms reduce their exposure to the risks associated with borrowed capital. Non-leveraged professional lending companies can operate on a local or national level.

Focused Hard Money Lending Professionals

Focused hard money lenders limit the area in which they lend and fund loans ranging in size from several hundreds of thousands to loans in the low millions. These private money lenders specialize in specific markets, allowing them to develop deep knowledge of local real estate conditions, property values, and market trends. This localized expertise enables faster decision-making, more accurate valuations, and tailored lending solutions that national lenders may not provide. For example, a focused lender in Denver may be more familiar with zoning regulations, neighborhood trends, and local construction timelines than a national lender.

Limited partners in these lending companies share in the interest earned and often receive above-average yields compared to traditional income investments, such as diversified bond funds. Borrowers benefit from working with these professionals due to their personalized approach, flexible underwriting, and quick turnaround times—critical factors in competitive real estate markets. Unlike large institutions with rigid approval processes, focused lenders can offer customized loan terms, making them an ideal choice for investors needing fast, reliable real estate investment funding solutions.

Full disclosure: Montegra Capital and its principal, Robert Amter, (the author of this article) operate this type of company.

National Hard Money Lenders

Perhaps the most common source of funds for hard money loans, national hard money lenders operate nationwide (or in large regional areas) and typically fund loans starting at $500,000 up to several millions of dollars. These national companies have a large staff and get their funds from a variety of sources including wealthy individuals and also lines of credit. While these national lenders may be able to offer a higher loan amount than a local company, they often do not have the local expertise. Communicating with out-of-state lenders in case of problems may prove difficult.

Hedge Fund and Similar Pooled Investment Vehicles

Hedge funds and similar pooled investment vehicles have been entering the hard money funding arena in increasing numbers over the past few years. These hedge fund lenders – often capable of deploying multiple millions of dollars – recognize the basic conservative nature of hard money lending and are now attempting to dominate the market. They can provide loans up to almost any size though typically they are not interested in loans below $5,000,000.

Contact Montegra For a Colorado Hard Money Loan

If you’re seeking a reliable, experienced hard money lender with deep local market knowledge, Montegra Capital Resources is here to help. Working with a lender like Montegra means receiving tailored solutions from professionals who understand Colorado’s unique real estate challenges. As a focused hard money lending firm in Denver, Colorado, we offer flexible loan solutions on Colorado properties, quick approvals, and personalized service tailored to your unique real estate financing needs. With decades of experience, Montegra understands the complexities of commercial real estate and is committed to helping you secure the funding you need—fast and efficiently.

Ready to get started? Contact Montegra today to discuss your project and explore your financing options.