“Hard money” refers to ongoing private or government funding for specific projects or production of metal coins. Private organizations may also provide hard money loans for community causes, with interest rates varying based on risk. Some governments used to back paper currency with precious metals, but many now use fiat money.
“Hard money” is a financial term used to describe two different types of money situations. An application is for ongoing private or government funding rather than just a one-time grant. The second application focuses on the production of money in the form of metal coins that include gold, silver or platinum. In the latter application, the term denotes that the coin is composed of a material that is durable and tangible, and is likely to retain some level of value over the long term.
When it comes to government grants, “hard money” has to do with ongoing support of specific projects that meet the requirements set by a government agency. An example of this type of request would be grants awarded to day care centers to enable them to provide services in the community in which they reside. A similar approach if you often come across health clinics that provide rudimentary healthcare to people living within a limited geographic area. Instead of happening just once, these grants are renewed annually.
Private organizations and businesses can also provide hard money to worthy causes. Scholarship programs that are continually funded by a company or group of companies are one example. In addition, businesses or non-profit organizations can also provide hard money loans associated with a cause or project deemed vital to the community, typically at rates well below those for business loans.
As with other types of lenders, hard money lenders establish basic qualifications to receive the loan. When loans are extended to charities or community causes, there is a good chance that interest rates will be low. At the same time, hard money mortgage lenders may charge higher interest rates than the average rates available from other lenders. Typically, a mortgage of this type is based more on the equity of 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 the lender assumes in exchange for approving the loan.
There was a time when governments tended to use hard money as backing for their paper currency and currency. This is because precious metals like gold or silver tend to hold their value, creating a strong foundation for the value of the nation’s currency. Over time many nations have moved away from this process and tend to use what is known as fiat money. Although tradable, fiat money is legal tender as a result of government decree and not because it has any value of its own.
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