What is Hard Money?

What is ‘hard money?’

Hard money has many different meanings depending on the context and can relate to currency, loans, and political donations, to name a few. In general, it refers to a specific funding chain that is generally provided by a government agency or other financial organizations.

Another way to describe hard money is actual physical currency. In such a case, hard money would represent coins made out of precious resources, such as platinum, silver, and gold.

Hard money loans are used for short-term financing, and the loans are always secured by an asset. Traditional financial institutions don’t offer hard money loans, so this lending option is only available through private lenders and individual investors.

Hard money originally referred to the physical properties of metallic money, which, unlike paper currency, is made of hard substances. This is the origin of the colloquial English expression, “cold, hard cash.”

The distinction between “hard” metal coins and “soft” paper money was borne by the fact that metallic coins are solid, physical tokens with intrinsic economic value independent of their monetary status. Meanwhile, paper fiat currency only represents a promise to pay the bearer in physical money upon redemption.

In the absence of metallic monies, hard money today often refers to other types of monetary instruments that, to some extent, behave more like metallic money in domestic and international markets. For Example gold bullion

Hard money

Alternative Uses of the Term “Hard Money”

Hard money is also a term used in a number of other contexts in finance. All of these are related to the original economic distinction between hard and soft money in that they indicate the degree of confidence or reliability that the involved parties can place on certain funds. or financing.

Political Contributions

In politics, the term hard money means money donated directly to a politician or a political action committee. Hard money contributions carry some limitations and regulations, including how much you can contribute and the use of the funds. By comparison, donations to political parties, which don’t face the same limits and controls, are often referred to as soft-money contributions.

So, while an individual can donate up to $2,900 in hard money per election to a specific candidate in 2021, they could donate an unlimited amount to a political party.1 Soft money in this sense is a less reliable way for a donor to support a specific candidate because the party may redirect funds to candidates of their choosing.

Broker Commissions or Fees

Hard and soft money can also refer to how clients pay their brokers or financial services providers. In this case, hard money refers to direct payments for services rendered—brokerage commissions—while soft money refers to payments for indirect items, such as the settlement of a costly error by providing free research.

Soft money arrangements in the financial industry are common but are not usually disclosed to stakeholders and regulators.


A hard money loan is one that is backed by the value of a physical asset, such as a car or home. The collateral for the loan means that this hard money loan has a more reliable value than an unbacked loan. Loans of this type typically have a higher interest rate than what the borrower might receive through a traditional mortgage lender or other established financing channel.

Private investors or individuals most often issue a hard money loan as lenders of last resort due to timing or perhaps the distressed financial situation of the borrower.

Government Funding

Hard money is a term sometimes used to describe an ongoing funding stream originating from a government agency or other organization. The flow of funds represents a reliable series of payments, rather than a one-time grant. Hard money could take the form of government daycare subsidies or annual scholarships to post-secondary students.

Hard money is a preferred form of funding by government sub-units and government-funded organizations because it provides a predictable stream of funds. In the case of a student scholarship, it provides budget certainty to the student planning for their time in college. By comparison, one-off grants can make long-term planning and budgeting more challenging.

Hard Money vs. Soft Money

Financial Context

In the most basic economic context, hard money is used to describe physical currency, such as coins, while soft money is used to describe paper currency. In regards to finance, they take on a different definition.

A hard money loan refers to asset-based financing where the borrower receives funds that are secured by real property. In most cases, private investors are the biggest lenders of hard money loans, and they are considered difficult to acquire.

A soft money loan refers to an asset-based form of financing that carries a below-average interest rate and is generally easy to acquire. Although a soft money loan is still secured by real property, it is considered much easier to acquire in comparison.

Political Context

In politics, hard money and soft money refer to campaign funding that comes from different types of contributions.

Hard money refers to donations used to directly support or oppose a candidate running for federal office.

Soft money refers to donations that are used to directly support political parties and not specific candidates that are outside of the federal limits and are often referred to as “non-federal” contributions. The donations can be spent on generic objectives, such as general party support.