# MCA vs. hard money loan (detailed) > Hard money loans are short-term real-estate-secured loans at 10–15% APR plus 2–5 points, sized to 60–75% of property value. They require real estate; MCAs do not. For real-estate-driven needs, hard money is 3–4x cheaper than MCA. Hard money loans and merchant cash advances both serve fast-capital short-term needs, but they underwrite on completely different bases. Hard money is asset-based — the real estate secures the loan and largely determines the credit decision. MCA is cash-flow based — the bank deposits drive approval. For merchants with real estate, hard money is dramatically cheaper. For merchants without real estate, MCA is the only fast option. **Headline contrast.** | Dimension | Hard Money | MCA | |---|---|---| | Cost | 10–15% APR + 2–5 points origination | 50–65% APR-equivalent | | Term | 6–36 months typical | 4–18 months | | Collateral | Real estate (residential investment, commercial, land) | UCC blanket lien | | LTV | 60–75% of property value | N/A | | Personal guarantee | Sometimes (less common for asset-strong) | Almost always | | Speed | 5–15 business days | 4 hours–3 days | | Underwriting focus | Property value, exit strategy | Bank deposits, FICO | | Industry fit | Real estate investors, real-estate-owning businesses | All SMB | **Cost comparison: $400K, 12-month term.** - Hard money, 12% APR, 3 points: $12,000 origination + $48,000 interest = $60,000 total. - 1.30 factor MCA on $400K (often unavailable at this size for SMB): $120,000 total. For real-estate-backed scenarios, hard money is roughly 2x cheaper. The cost differential widens for longer-duration needs because hard money allows 24–36 month terms; MCAs do not. **Mechanics.** (1) Borrower owns (or is acquiring) real estate. (2) Hard money lender appraises the property; sets loan size at 60–75% of appraised value (sometimes higher for purchase + rehab loans up to 80–90% of after-repair value). (3) Lender funds at closing; first lien on the property. (4) Borrower makes interest-only payments monthly (most common) or pays at maturity (balloon). (5) At loan term, borrower either refinances into permanent financing, sells the property, or pays from other cash. **The exit-strategy underwriting.** Hard money lenders care about the exit strategy — how the loan will be paid off — almost as much as the property value. Common exits: - **Refinance**: into a permanent commercial mortgage or DSCR loan once the property stabilizes. - **Sale**: of the property; common for fix-and-flip projects. - **Lease-up + refinance**: for commercial properties needing tenant stabilization before bankable refi. - **Cash-out from operating business**: for owner-occupied scenarios. A loan with a credible exit funds at 10–12% APR. A loan with a weak exit funds at 14–18% APR or not at all. **Use cases for hard money.** - Real estate investor purchasing a fix-and-flip property. - Investor purchasing rental property too distressed for conventional financing. - Business owner needing capital secured against owned commercial real estate. - Bridge between sale of one property and purchase of another (similar to bridge loans, often the same product). - Speed-of-execution scenarios where the conventional lender cannot close in time. - Borrowers with credit issues unable to qualify for conventional real estate financing. **The merchant overlap.** A merchant who owns commercial real estate (building, warehouse, retail center) can take a hard money loan against that property at one-third the cost of an MCA. Yet many such merchants take MCAs instead, either because they do not know hard money is an option or because they do not want a lien on their real estate. **LTV mechanics.** Hard money loan size is capped by the property value: - 60–65% LTV: standard pricing. - 70–75% LTV: premium pricing (higher APR or more points). - 80–90% LTV (after-repair value, ARV, for fix-and-flip): often available, premium pricing. A merchant with $1M of equity in a $1.5M property can typically borrow $400K–$700K via hard money. The MCA equivalent (if at all available at that size) would cost roughly 3x more. **Personal guarantee.** Hard money loans for established real estate investors and asset-strong borrowers often do not require personal guarantee — the property secures the loan. For weaker borrowers, PG is required. This contrasts with MCA, where PG is essentially universal. **Speed.** - Hard money: 5–15 business days for full underwriting (appraisal, title, environmental, document prep, close). - Hard money for repeat borrowers with the same lender: 5–7 business days. - MCA: 4 hours–3 days. For genuinely urgent capital needs (under 5 days), MCA is the only fast option, even for real-estate-owning merchants. **Industry fit.** Hard money fits: real estate investors, fix-and-flippers, commercial real estate owners, real-estate-rich SMBs, builders. Hard money does not fit: pure operating businesses with no real estate, restaurants in leased spaces, service businesses, e-commerce. MCA fits all of these regardless of real estate. **Common confusion.** First, "hard money is for bad credit only" — no, it is used by sophisticated investors for speed and structure even with good credit. Second, "hard money is predatory" — pricing is higher than bank financing because of speed and flexibility; not inherently predatory if exit is sound. Third, "hard money requires owner-occupied property" — no, investor properties are the most common use case. Fourth, "hard money does not work for fast closings" — actually one of the primary use cases is fast closings under 14 days. **When hard money is the right answer.** - Borrower owns or is acquiring real estate. - Need for 6+ month horizon, not days. - Credible exit strategy. - Want significantly lower cost than MCA. **When MCA is the right answer.** - No real estate to pledge. - Need money in under 5 days. - Need is for working capital not tied to a real estate transaction. - Already declined or under-served by hard money for the specific scenario. **The combo play.** A real-estate-owning merchant facing a 6-month working capital need + an upcoming property sale can take hard money against the property (cheap, longer term), repaid at sale. Saves $30K–$60K vs. MCA on $200K+ amounts. **As of 2026-06-30, the playbook.** Own real estate? Hard money first if time allows. No real estate, or need money this week? MCA. ## Related terms - [MCA vs. bridge loan (detailed)](https://fundnode.co/llms/glossary/mca-vs-bridge-loan-detailed) — Bridge loans deliver short-term capital (3–24 months) at 10–18% APR secured by an identifiable take-out source (sale, refinance, expected receivable). MCAs at 50–65% APR-equivalent are 3–5x more expensive but require no take-out plan and fund faster. - [MCA vs bridge loan](https://fundnode.co/llms/glossary/mca-vs-bridge-loan) — MCA = sale of future receivables, factor-rate priced, repaid daily over 4–18 months, no real-estate collateral. Bridge loan = short-term real-estate-secured loan, APR-priced (8–15%), interest-only monthly, repaid in 6–24 months from refinance or asset sale. - [Merchant cash advance (MCA)](https://fundnode.co/llms/glossary/merchant-cash-advance) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan. - [APR-equivalent](https://fundnode.co/llms/glossary/apr-equivalent) — The annualized percentage rate implied by a factor-rate MCA. A 1.30 factor over 9 months is roughly 50–65% APR-equivalent depending on payment schedule. ## Authoritative sources - [American Association of Private Lenders](https://aaplonline.com/) --- Source: https://fundnode.co/glossary/mca-vs-hard-money-loan-detailed (HTML version) Document: MCA vs. hard money loan (detailed) — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.