Hard money and private capital
Short-term financing can solve timing or condition problems, but it creates a deadline. Model points, interest, draws, inspection fees, minimum interest, extension terms, and the consequence of missing the exit date. Ask whether payments are required monthly or interest is otherwise handled under the agreement.
Private money comes from a person or entity rather than a standardized retail program. Friendship does not replace documents. Use legal help to establish loan terms, collateral, lien priority, repayment, defaults, and the responsibilities of each party. Raising investment capital can create additional requirements beyond a simple loan.
Avoid funding a project whose only viable exit is a future lender approving it. Maintain a sale or capital fallback and enough liquidity to finish the work. Borrowing for speed is useful only when the timeline is credible.
A six-month renovation loan funds a project expected to take four months. If permits take two extra months, there is no allowance for leasing or refinancing. The timeline needs more room or a different loan.
Decision checklist
- Confirm funding, draw requirements, maturity, and extension terms.
- Document the obligations of borrower and lender.
- Maintain a credible fallback if the preferred exit is delayed.
Check your understanding
Why is the maturity date part of the investment analysis?
Show the answer
It defines when repayment is required. Delays can create extension costs or a financing gap.
Your next action
Draw the funding timeline from closing through payoff. Include delay allowances and a fallback exit.
Original teaching framework and hypothetical example. Source directory and editorial approach →