What is Hard Money?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 22 August 2019
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"Hard money" is a financial term that is used to describe two different types of money situations. One application has to do with private or government funding that is ongoing rather than simply a one-time grant. The second application focuses in on the production of money that is in the form of metal coins that include gold, silver, or platinum. In the latter application, the term denotes that the currency is composed of a material that is lasting and tangible, and is highly likely to retain a certain level of value over the long-term.

As it relates to government grants, "hard money" has to do with ongoing support of specific projects that meet qualifications put in place by a government agency. An example of this type of application would be the grants provided to daycare centers in order to allow them to provide services in the community in which they reside. A similar approach if often found with health clinics that provide rudimentary healthcare to people living within a limited geographical area. Rather than occurring on a one-time basis, these grants are renewed on an annual basis.


Private organizations and businesses may also provide hard money to worthy causes. Scholarship programs that are continuously funded by a business or group of businesses are one example. In addition, businesses or non-profit organizations may also provide hard money loans associated with a cause or project that is considered vital to the community, usually at rates that are well below those that apply to commercial loans.

As with other types of lenders, hard money lenders do set basic qualifications for receiving the loan. When the loans are extended to charities or community causes, there is a good chance that the lending rates will be low. At the same time, hard money lenders who provide mortgages may charge interest rates that are higher than the average rates available from other lenders. Typically, a mortgage of this type is based more on the equity in the property and less on the owner’s current credit rating or income level. The higher interest rates and fees associated with the hard money mortgage serve to offset some of the risk that the lender takes on in exchange for approving the loan.

At one time, governments tended to use hard money as the backing for their paper and coin currency. This is because precious metals like gold or silver tended to hold their value, creating a firm foundation for the worth of the nation’s currency. Over time, many nations have moved away from this process, and tend to utilize what is known as fiat money. While negotiable, the fiat money is legal tender as the result of a government decree and not because it has any value of its own.


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