The Quick Read: A small balance hard money loan is a short-term, interest-only loan on a non-owner-occupied one-to-four-unit flip, and it qualifies primarily on the deal itself: the purchase price, the rehab budget, the after-repair value, and a clear exit, with credit and experience setting your leverage tier. Lenders still check your credit, your cash, and your track record. Those factors decide how much they will lend, not whether the deal makes sense.
- Leverage is tied to project cost and experience: 85% of project cost with fewer than two completed projects, 90% at two or more, and 93% at five or more. Every tier is capped at 75% of after-repair value.
- The minimum credit score is 620, with additional conditions below 660. First-time investors qualify at the lower leverage tiers.
- Terms run 6 to 18 months, interest-only, with no prepayment penalty.
- The rehab budget is released in draws after work is completed. You fund the work first and get reimbursed.
- Loan amounts go up to $5,000,000, and smaller balances vary by lender. Everything here varies by lender, property, and experience, and nothing is a commitment to lend.
What Does “Small Balance” Mean for a Flip Loan?
“Small balance” has no official definition. It is a market label for loans near the bottom of what lenders will fund, and each lender sets its own floor. Below that floor, a file is hard to place.
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.
This article covers small-dollar, short-term, asset-based flip loans on residential property. It does not cover small-balance commercial or agency multifamily loans, which are long-term products with a different purpose.
Why do floors exist? Valuation, legal work, and draw inspections cost about the same on a small loan as on a large one. A lender earns less on the small loan, so many lenders set minimums or adjust fees. That fixed-cost drag also hits you. A small flip has a smaller profit pool to absorb the same fees.
Lendmire’s wholesale network handles loans up to $5,000,000, larger by exception. Minimum balances differ across the lenders in it. Ask early which lenders fit your loan size, because that saves a round of dead-end submissions.
How Do Lenders Underwrite a Small Flip?
Lenders underwrite the project first and the borrower second. The question is whether the property, once repaired, is worth enough to repay the loan if the plan stalls. Your profile then decides how much leverage you get.
| Factor | What the lender checks | Why it matters |
|---|---|---|
| Purchase price | Contract and as-is value | Sets the base for leverage |
| Rehab budget | Line-item scope of work | Shows the plan is real |
| After-repair value | Comparable sales | Caps the loan |
| Credit score | Report against the program minimum | A gate, and it affects tier |
| Experience | Completed projects | Sets the leverage tier |
| Liquidity | Bank statements | Proves you can fund cash and draws |
| Exit | Sale or refinance plan | Shows how the loan gets repaid |
You will not be asked for employment and income documents the way a standard mortgage borrower is. The file is built around the property, the plan, and the exit.
The Core Requirements, One at a Time
Leverage and Experience
Leverage is measured against project cost, meaning purchase plus rehab, and then capped against after-repair value. The lower result controls.
Lendmire’s network ties the tiers to documented completed projects:
- Five or more projects: up to 93% of project cost.
- Two or more projects: up to 90% of project cost.
- Fewer than two: up to 85% of project cost.
- Every tier: capped at 75% of after-repair value.
Up to 100% of the rehab budget funds through draws against completed work. That is a rehab-budget figure, not a purchase loan-to-value. There is no true 100% purchase program. The top tier is reserved for experienced investors.
Credit
The minimum score is 620, with additional conditions below 660. Underwriting stays asset-based, so a strong deal helps, but credit is still a gate. A thin or damaged report can limit your tier or require more cash in the deal.
Cash and Liquidity
Hard money does not remove the need for cash. You pay the gap between the loan and project cost, plus closing costs and interest carry. You also float rehab work between draws.
Lenders ask for bank statements to confirm the cash exists. Required liquidity and interest reserves vary by lender, leverage, and loan size. Reserves are a common reason first-time files stall.
Entity and Personal Guarantee
Most flippers close in an LLC and sign a personal guarantee, subject to lender program eligibility. The entity holds title, and you stand behind the loan personally. Have your operating agreement and good-standing documents ready before you apply.
Insurance
Expect to carry builder’s-risk or vacant-property coverage during the rehab. A standard homeowner policy often does not fit a property under renovation. Price this before you commit, because it affects your carry.
Property and Project Requirements
Eligible collateral is non-owner-occupied residential property with one to four units. Ground-up construction runs to ten units. Owner-occupied homes, commercial buildings, industrial property, land, and hospitality properties are not offered.
Your scope of work matters as much as the property type. A line-item budget with realistic costs tells the lender you understand the job. Heavy structural work or a conversion can trigger tighter review. Lenders also want valuation support: recent comparable sales that justify your after-repair value. Thin comps in lower-priced areas are a frequent snag on small deals.
A Worked Example in Percentages
Here is how sizing works, using percentages of after-repair value instead of dollars. These are modeled assumptions, not program terms or market data.
Assume purchase plus rehab equals 70% of after-repair value, and the borrower has fewer than two completed projects.
| Step | Result |
|---|---|
| Project cost | 70% of after-repair value |
| Leverage at that tier | 85% of project cost |
| Loan as a share of after-repair value | About 59.5% |
| Check against the 75% cap | Passes, with room to spare |
| Your cash in the deal | About 10.5% of after-repair value |
Closing costs and interest carry come on top of that cash. At five or more projects and 93% of cost, the loan rises to roughly 65% of after-repair value. Your cash drops to about 5% of after-repair value. Experience reduces how much cash you put in.
The cap bites when costs run high. If total project cost climbs toward the top of the after-repair value, the 75% of after-repair value cap controls instead of the loan-to-cost percentage, and you would need to bring far more cash.
Documents Checklist
Most small-balance flip files include these items:
- Application and government ID.
- Purchase contract.
- Line-item scope of work and budget.
- Bank statements for cash to close and liquidity.
- Entity documents, if you are using an LLC.
- Evidence of completed projects, to qualify for a higher tier.
- An exit plan, and sometimes contractor quotes or photos.
Each item answers one question for the lender. The contract proves the price. The scope proves the plan. The statements prove the cash. The project history proves the tier.
Structures and Variations
The standard flip structure is short-term and interest-only. Terms run 6 to 18 months, and the full principal comes due at maturity. There is no prepayment penalty on the current program, and there are no multi-year options.
Beyond the rehab flip, the network also places:
- Bridge purchases without rehab: up to 80% of purchase price.
- Cash-out and rate-and-term refinances: up to 65% of value.
- Ground-up construction: up to 90% of cost and 75% of completed value at three or more completed projects.
Whether interest accrues on the full loan from day one or only on drawn funds varies by lender. On a small loan that difference changes your carry noticeably, so ask for it in writing before you choose.
Where the General Rule Breaks
First-timers. Many lenders adjust leverage and cash required rather than decline. Reserves and a credible scope are what usually decide these files.
Low credit. A score between 620 and 659 carries additional conditions. A strong deal does not erase them.
Heavy scope. Additions and conversions can bring stricter review and slower draws.
Pure hard money versus program loans. Some private lenders lend purely on asset value with few borrower checks. Program lenders verify credit and experience. Lendmire’s network is asset-based but still checks the borrower, so do not assume a lender skips credit review.
The business-purpose line. These loans must be for investment, not for a home you live in. Credit for business purposes falls outside the consumer mortgage rules. The CFPB’s Regulation Z exempts it, and America’s Credit Unions notes the exemption also covers credit extended to someone other than a natural person. That is why lenders skip the usual income paperwork. It is also why a loan for your own residence does not belong in this product.
Why Small Files Stall, and the Fix
| Problem | Common fix |
|---|---|
| Cash falls short | Lower the scope or find a lower-cost property |
| Weak comps | Pull more recent sales and document adjustments |
| Vague budget | Get contractor bids and itemize the work |
| Score under 660 | Pay down balances and expect added conditions |
| Thin experience | Accept the 85% tier and bring more cash |
| Loan below lender minimum | Ask about lenders with lower floors |
Before you apply, run a quick self-check. Do you have the cash gap, closing costs, and carry covered? Is your budget itemized? Do your comps support the after-repair value? Is your entity formed? If any answer is no, fix it first.
The Exit: Sale or Refinance
A flip loan ends with a sale or a refinance. Thinner margins make carry cost matter more. ATTOM reports that flips were 6.2% of home sales in the second quarter (77,991 homes), with a typical return of 21.5% that has slipped gradually over two years.
If you keep the property as a rental, many investors refinance out of hard money into long-term DSCR financing once it is stabilized. DSCR compares monthly rent to the full monthly payment, and Lendmire brokers that path. Rehab quality and realistic rent matter at that stage. The complete DSCR loans guide explains how that exit works. Tax treatment varies, so consult a qualified professional before relying on any deduction.
Key Terms Defined
After-repair value (ARV): The estimated value of the property once the rehab is finished.
Loan-to-cost: The loan amount as a share of purchase price plus rehab budget.
Draw: A release of rehab funds after the lender confirms completed work.
Holdback: The part of the loan reserved for rehab and released in draws.
Personal guarantee: Your promise to repay if your LLC does not.
Interest-only: A structure where you pay interest during the term and owe the full principal at maturity.
Frequently Asked Questions
Do first-time flippers qualify?
Usually yes, at the lower leverage tier. With fewer than two completed projects, leverage runs up to 85% of project cost, capped at 75% of after-repair value. Expect to bring more cash and show a solid scope of work.
Is credit checked on a hard money flip loan?
Yes. The loan is asset-based, so the property and plan drive the decision, but credit still sets the tier and conditions.
Is personal income verified?
Not in the way a standard mortgage verifies it. Qualification rests on the property, the budget, the exit, and your liquidity, subject to lender guidelines.
Do I need an LLC?
Most borrowers close in one, subject to lender program eligibility. The lender typically also requires a personal guarantee, so your credit and assets stay in play.
Is there a minimum loan size?
Yes, but it differs by lender. The network goes up to $5,000,000, and smaller balances vary by lender. Ask which lenders accept your loan size before you submit.
If You’re Ready to Run Your Numbers
If you are buying, rehabbing, or refinancing an investment property 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. Lendmire is a mortgage broker arranging financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. Reach the team at 828-256-2183.
About Lendmire
A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Many investors treat hard money as the acquisition tool and plan the exit up front – see the hard money loan overview.
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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. CFPB, Regulation Z § 1026.3
2. America’s Credit Unions, business-purpose loan regulations
3. ATTOM, home flipping profits
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 Buy a Flip in an LLC With a Hard Money Loan? · Can You Get a Hard Money Loan Without Owning a Business? · Is a Hard Money Fix and Flip Loan Worth It for a Business Owner?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.