The Quick Read: There is no single national hard money license: each lender is licensed or exempt under the laws of the state where the property sits, and a flipper’s file proves a business-purpose loan through entity papers, a purpose statement, a scope of work, a budget and a draw schedule. The lender’s status is not something to assume. The paperwork is what keeps the loan in the business-purpose lane.
- Licensing follows the collateral. The state where the property sits matters more than where you or the lender are based.
- Three questions decide it. Is the loan for business or personal use, is the borrower an entity or a person, and is the collateral someone’s home?
- You verify, not the lender. Checking the lender’s and broker’s license status in the property’s state takes a few minutes and protects the whole project.
- Documents come in two piles. You submit an underwriting file, then sign a closing set, then keep producing paperwork through the rehab draws.
- Nothing here is legal advice. Programs vary by lender, property, and experience, and nothing here is a commitment to lend.
Does a Hard Money Lender Need a License?
It depends on the state, and the answer usually turns on three facts: whether the loan is business or consumer purpose, whether the borrower is an entity or an individual, and whether the collateral is a home. Many states exempt business-purpose loans to entities secured by investment property. Some license those lenders anyway.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
“Hard money” and “private money” are terms of convenience, not legal categories. A lender discussion on BiggerPockets makes the point with California as an example: a lender there does not need NMLS registration for a business-purpose loan, yet still needs a real estate broker license or a Finance Lender license to make it. That is practitioner commentary, so treat it as an illustration of how the rules differ, not as a state-by-state list.
A licensing consultancy’s explainer frames the same logic. Business-purpose loans to entities secured by investment property are exempt from lender licensing in many states. A few states license even those lenders. A loan secured by an owner-occupied home pulls in mortgage licensing in most states, whatever the note says.
For the flipper, this means the lender’s license is the lender’s problem, but the consequences are yours. An unlicensed lender in a state that requires a license can create enforceability questions, and those questions land on your project. Lendmire is a broker that arranges these loans through lenders in its wholesale network, and each lender or broker in the chain is responsible for being licensed or exempt where the property sits. Your counsel or the state regulator has the final word on any specific loan.
What Are the Program Boundaries?
Licensing only matters inside a loan that actually fits the program. For context, hard money through Lendmire’s network is built around business-purpose investors buying or rehabbing non-owner-occupied residential property of 1-4 units. Ground-up construction runs to 10 units. Owner-occupied properties are not part of it.
The leverage figures below vary by lender, property, and experience. Each is subject to lender guidelines.
| Structure | Typical ceiling |
|---|---|
| Fix-and-flip, 5+ completed projects | 93% of project cost |
| Fix-and-flip, 2+ completed projects | 90% of project cost |
| Fix-and-flip, fewer than 2 projects | 85% of project cost |
| Every flip tier | Capped at 75% of after-repair value |
| Bridge purchase, no rehab | Up to 80% of purchase price |
| Cash-out or rate/term refinance | Up to 65% of value |
Rehab funds, up to 100% of the rehab budget, are released in draws against completed work. That is a budget figure, not a purchase leverage figure. There is no true 100% purchase program.
Terms run 6-18 months, interest-only, with no prepayment penalty. A 620 credit score is the minimum, with extra conditions below 660. Loan amounts run up to $5,000,000, with larger loans by exception. Underwriting stays asset-based: the property, the plan and the exit. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Why Business Purpose Drives the Paperwork
Hard money files lean on entity documents and purpose statements because they keep the loan in the business-purpose lane. Business-purpose investor loans are reviewed differently from a standard owner-occupied mortgage, and the documents are how the lender shows that.
Purpose is decided by the facts of the loan, not the label on the note. A lender cannot turn a personal-use loan into a business loan by writing “business purpose” on the first page. That is why the lender asks for the purchase contract, the scope of work, the entity papers and a signed statement that the property will not be your home.
This is also why the same paperwork serves two jobs. It tells the underwriter whether the project can be repaid. It also shows a regulator, or a court, what the loan was for.
How to Check Your Lender’s License
Verification is a short routine, and it belongs before you pay an appraisal or application fee. These steps work for most states.
1. Name the state where the property sits. Licensing follows the collateral, not your mailing address.
2. Find that state’s financial or real estate regulator. The department that licenses lenders is sometimes separate from the one that licenses brokers.
3. Look up the lender and the broker by legal name. Use the exact entity name on the term sheet, not a marketing brand.
4. Check whether the state requires a license for business-purpose loans on 1-4 unit property. If it does, the license should appear. If it does not, ask the lender to state the exemption it relies on.
5. Ask for the answer in writing. A lender that is properly licensed or exempt can say so plainly.
6. Take open questions to counsel. Licensing rules differ by state, so if anything remains unclear, the state regulator or an attorney licensed there is the right place to get a definitive answer.
A lender that tells you licensing “does not apply anywhere” is also a warning sign, because several states license business-purpose lending.
What You Submit, in Underwriter Order
A lender-ready file follows the order an underwriter reads it: the property first, then the borrower and entity, then the rehab package. Hard money underwrites mainly on collateral value and the plan rather than borrower income, according to a fix-and-flip requirements checklist. The checklist also notes a construction holdback and draw schedule built around the rehab plan.
| Document | Why the lender wants it | Common mistake |
|---|---|---|
| Signed application | Starts the file | Personal name instead of entity |
| Purchase contract | Fixes price and parties | Missing addenda |
| Scope of work | Defines the rehab | Vague line items |
| Rehab budget | Sizes the draws | Budget does not match scope |
| Contractor bids and insurance | Shows who builds | Unlicensed or uninsured bidder |
| Entity papers and EIN letter | Proves who borrows | Expired good standing |
| Photo ID and operating agreement | Confirms signers | Signer lacks authority |
| Prior project record | Sets the leverage tier | Overstated completed projects |
| Exit plan | Shows repayment | No sale or refinance path |
The prior project record deserves attention. The leverage tiers above depend on documented completed projects, so a clean, truthful record is worth more than a polished narrative. Lenders also ask for bank statements and proof of funds for the equity you bring.
Most delays come from the scope and budget. A budget that does not match the scope tells the underwriter the plan is not finished, and a weak scope can slow draws later. Build both before you apply.
What You Sign at Closing
The closing set creates the debt, ties it to the property and sets the rules for the rehab. The lender issues most of it, and you or your entity sign it. The exact set varies by lender and state.
| Document | Who issues it | Who signs |
|---|---|---|
| Promissory note | Lender | Borrower entity |
| Deed of trust or mortgage | Lender or title agent | Borrower entity |
| Loan agreement | Lender | Borrower entity |
| Personal guaranty | Lender | Individual guarantor |
| Draw agreement and holdback terms | Lender | Borrower entity |
| Business-purpose certification | Lender | Borrower and guarantor |
| Entity authorization resolution | Borrower or counsel | Entity members |
The security instrument depends on the state. According to a BiggerPockets thread on private lending documentation, it is a deed of trust in deed-of-trust states and a mortgage in lien-theory states. The note is your promise to repay. The security instrument ties that promise to the property and is recorded, which sets the lender’s lien position.
The loan agreement carries the representations, covenants and default terms. Read the default and extension sections closely, because a 6-18 month, interest-only term leaves little room for surprises.
Because these are business-purpose loans, the federal disclosure rules written for consumer mortgages generally do not apply. The paperwork is shorter in one way and heavier in another. Expect more construction and entity documents than a standard home loan carries.
Paperwork After Closing
A fix-and-flip generates paperwork long after closing, because rehab money is released in draws against completed work. The lender typically funds up to 100% of the rehab budget this way. It does not hand the money over up front.
- Draw requests. You submit a request tied to line items in the budget, usually with photos and invoices.
- Inspections. A third-party inspector often verifies completed work against the scope before each draw, according to one lender-adjacent guide.
- Change orders. If the scope shifts, update the budget on paper before the work happens.
- Extensions. Request one before the term ends, since extension terms are set in the loan agreement.
- Payoff and release. On a sale, the title company handles the payoff letter, and the lender releases its lien once paid.
One common mistake is using bridge-loan paperwork for a project with real construction risk. Those documents do not address draws, holdbacks or completion, and the gaps surface when a contractor invoice arrives.
One Flip, Start to Finish
Consider an investor with two completed projects who buys a 3-bedroom house through an LLC. The numbers below are percentages only, and each is a typical ceiling that varies by lender, property, and experience.
1. Before applying. The investor checks the lender’s and broker’s license status in the property’s state and confirms the entity is in good standing.
2. Application. The file carries the contract, entity papers, EIN letter, scope, budget, contractor bids and proof of funds.
3. Underwriting. With two completed projects, the file falls in the 90% of project cost tier, capped at 75% of after-repair value. The lender reviews the plan and exit.
4. Closing. The LLC signs the note, security instrument, loan agreement and business-purpose certification. The owner signs the guaranty.
5. Rehab. The investor submits draw requests as work completes. Inspections verify the work before each release.
6. Exit. The investor sells and pays off the loan. If the deal calls for a rental hold instead, many investors refinance out of hard money into long-term financing once the property is stabilized. Lendmire brokers that path, and the complete DSCR loans guide explains how the rental coverage test works.
A clean file at the front end also makes the rental exit easier. The refinance underwriter will want the same entity documents, the final scope and proof of completion.
Where the General Rule Breaks
The business-purpose exemption is real, but it has edges. The federal exemption for business-purpose credit comes from CFPB Regulation X, section 1024.5, which excludes credit extended primarily for a business, commercial or agricultural purpose. It points to Regulation Z to decide when that exemption applies. These cases test it.
- Owner-occupied collateral. If you plan to live in the property, the loan is not a business-purpose flip. Most states then apply mortgage licensing and ability-to-repay rules, even if the paperwork says business purpose.
- Individual borrower with an LLC guarantor. The ABA Banking Journal explains that a consumer-purpose loan to an individual stays covered even if an LLC guarantees it. A business-purpose loan to an individual is not covered, guaranteed or not.
- Consumer-purpose loan to a trust. A trust is not automatically an exempt borrower, because the loan’s purpose still matters.
- Construction financing. The temporary-financing exemption in 12 CFR 1024.5 at Cornell LII has limits. It does not apply to a 1-4 family construction loan that is, or may convert to, permanent financing by the same lender, or that finances transfer of title to the first user.
- Misclassification. Calling a consumer loan business purpose does not change what it is. Other consumer protection laws may still apply to business-purpose loans.
- Cross-state loans. Licensing, usury and disclosure rules follow the property’s state.
- Property type. Eligibility also depends on the property.
An investor who later converts a flip into a rental should keep the entity and purpose paperwork intact. Documents that match the actual use make the next refinance straightforward.
Key Terms Defined
Business-purpose loan: a loan made primarily for investment or commercial use, not for personal, family or household use.
Deed of trust: a security instrument used in some states that ties the debt to the property through a third-party trustee.
Mortgage: the security instrument used in lien-theory states, recorded against the property.
Holdback: the portion of the loan kept back and released as rehab work is completed.
Draw: a release of rehab funds against verified, completed work.
After-repair value (ARV): the estimated value of the property once the planned rehab is finished.
Loan-to-cost: the loan amount as a share of the total project cost, including purchase and rehab.
Personal guaranty: a signed promise by an individual to repay if the borrowing entity does not.
Frequently Asked Questions
Do I need to be licensed to borrow hard money for a flip?
No. Borrowers do not need a license to take a business-purpose loan. The lender or broker may need a license in the property’s state, and your own state may regulate certain activities such as contracting or reselling. Confirm those separately with the relevant regulator.
Can I take a hard money loan in my own name instead of an LLC?
Often yes, but the entity matters for how the loan is classified and for your liability. If you borrow personally, the purpose of the loan is what keeps it in the business-purpose lane. An LLC guarantor does not turn a consumer-purpose loan into a business one.
What credit score and experience does a hard money lender look at?
A 620 minimum score is typical in the network, with additional conditions below 660. Experience sets the leverage tier: 85% of project cost with fewer than 2 completed projects, 90% at 2+, and 93% at 5+, all capped at 75% of after-repair value. First-time investors qualify at the lower tiers, subject to lender guidelines.
Is hard money lending unregulated?
No. It follows a different rulebook, not none. State licensing, usury limits and general consumer laws can still apply, and some states license business-purpose lenders. The rules vary by state, so check the property’s state.
How does a flip loan connect to a DSCR refinance?
A flip loan is short-term, so many investors who keep the property refinance into long-term rental financing once it is stabilized. A clean entity file, scope and completion paperwork make that exit easier, subject to lender guidelines and property review.
Next Steps
Tax treatment varies; consult a qualified professional before relying on any deduction.
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Hard money is available through select lenders in a 41-market network that includes Washington, D.C. Each file is reviewed individually, and nothing here is a commitment to lend.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.
Short-term financing tends to work best when the long-term plan is decided early – see the hard money loan overview.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. BiggerPockets: hard money lending license requirement
2. Cornerstone Licensing: how to become a hard money lender
3. Crequity: fix-and-flip loan requirements checklist
4. BiggerPockets: private lending documentation advice
5. OfferMarket: fix-and-flip lending
6. CFPB Regulation X, section 1024.5
7. ABA Banking Journal: individual borrower with an LLC guarantor
8. 12 CFR 1024.5 at Cornell LII
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Have More Than One Fix and Flip Hard Money Loan at Once? · Can You Get a Hard Money Pre-Approval Letter for a Flip? · Should You Ask a Hard Money Lender Questions Before a Fix and Flip?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.