Hard money loans in California

CALIFORNIA

Licence required, all property types

A licence is required to make these loans in this state even when the loan is business purpose and secured by investment property. This is the group where an unlicensed lender is a straightforward problem.

This page covers four things about borrowing hard money in California: whether the lender needs a licence, what actually decides whether your rate is lawful, how federal preemption interacts with it, and how long deals take here. Every figure shows the statute or dataset it came from.

Does a lender need a licence in California?

Either a California Financing Law (CFL) licence from DFPI or a DRE real estate broker licence. Applies even to business-purpose loans. CFL licensing has run 10-12 months.

California is the strictest of the six. A lender making these loans needs either a California Financing Law (CFL) licence from the Department of Financial Protection and Innovation, or a real estate broker licence from the Department of Real Estate. The business-purpose exemption that private lenders rely on in most states does not get them out of it.

The practical consequence for you: CFL licensing has been running 10 to 12 months. A lender who is not licensed cannot simply apply and be ready for your closing, which means an unlicensed lender quoting you a California deal is not a paperwork problem you can wait out.

What decides whether a rate is legal in California

Almost every site publishing on this topic gives you one number per state. That number is close to meaningless on its own. A rate that is lawful for one lender in California can be unlawful for another on the same day, on the same property, because four separate questions decide which body of law applies to your loan.

The four gates that determine which rate limit applies
Gate	The question
Purpose	Is the loan for a business, commercial or investment purpose, or for personal, family or household use?
Borrower	Are you borrowing as a natural person, or as an LLC, corporation or partnership?
Lender	Is the lender licensed, and under which statute?
Lien position	Is the loan secured by a first lien on residential real property?

Purpose: Many states remove the usury defence entirely for business-purpose loans. Washington is the clean example: under RCW 19.52.080 a borrower on a loan made primarily for a commercial, agricultural, investment or business purpose may not claim a defence of usury. This is why every hard money lender makes you sign a business-purpose affidavit.
Borrower: Several states exempt entity borrowers from some or all of the cap. In New York a corporation or LLC cannot assert the 16% civil usury defence at all, though the 25% criminal ceiling still applies. This is the other half of why lenders insist on title vesting in an LLC.
Lender: Licensed lenders frequently operate under their own rate statute rather than the general cap. California is the sharpest case: a loan made or arranged by a licensed real estate broker and secured by real property is exempt from the constitutional rate limit outright, under Civil Code §1916.1.
Lien position: If it is, federal law may preempt the state rate limit entirely under 12 U.S.C. §1735f-7a. A great many hard money loans are first-lien residential, so this gate is live far more often than borrowers realise.

Rate limits in California

A broker-arranged loan secured by real property is exempt from the rate limit.

Statutory rate limits in California

Constitutional limit	10% for personal, family or household loans; for other loans the greater of 10% or 5% above the San Francisco Federal Reserve discount rate
Key exemption	Loans made or arranged by a licensed real estate broker and secured by real property
Statute	Cal. Const. art. XV §1; Civ. Code §1916.1

California Civil Code §1916.1 provides that article XV of the state constitution does not apply to a loan or forbearance made or arranged by a person licensed as a real estate broker and secured, directly or collaterally, in whole or in part by liens on real property.

"Arranged" is doing real work in that sentence. Courts have required the broker to actively participate in putting the transaction together, not simply appear on the paperwork. The exemption has been litigated, including over whether a loan modification falls inside it. If your California lender is relying on a broker exemption, the broker licence is the thing to verify, and it is verifiable for free through the Department of Real Estate.

Separately, a lender licensed under the California Financing Law operates under that statute. California is also one of the few states that requires a licence for business-purpose lending, so the licence question and the rate question tend to be answered by the same document.

Cal. Civ. Code §1916.1 (official text)

Federal preemption, and the distinction nearly everyone gets wrong

Two different provisions of the Depository Institutions Deregulation and Monetary Control Act of 1980 are routinely written about as if they were one. They are not, and only one of them normally touches a hard money loan.

Section 501 — 12 U.S.C. §1735f-7a: Preempts state limits on the rate, discount points, finance charges and other charges on a loan secured by a first lien on residential real property, made after 31 March 1980, that meets the federally related mortgage loan definition. This one can apply to hard money, because a great many hard money loans are exactly that. States had until 1 April 1983 to opt out.
Section 521 — 12 U.S.C. §1831d: Lets federally insured state-chartered banks charge the rate allowed where the bank is located, and export it. Hard money lenders are generally not banks, so this provision usually has nothing to do with your loan, despite how often it is cited in articles about private lending.

Who supervises this in California

California Department of Financial Protection and Innovation (DFPI); California Department of Real Estate (DRE). Regulator names change; the CSBS directory is the authoritative list, and NMLS Consumer Access is where you check a specific company for free.

Regulators answer licensing questions at no charge, and a narrow question gets a useful answer where a broad one does not. Send this:

Does making a business-purpose loan secured by non-owner-occupied residential property in California require a CFL licence or a DRE broker licence?
Ask the California Department of Financial Protection and Innovation (DFPI); California Department of Real Estate (DRE)

How long deals actually take in California

Hard money is priced by the month, so the exit timeline is the cost driver. Median days on market below is measured from Redfin's county-level sales data for single-family homes (May 2026). The term column adds a five-month renovation and 45 days for your buyer to close, which is the part borrowers routinely leave out of the term they request.

Resale timing in California, by county
County	Sales	Median price	Median days on market	Realistic term needed
Sacramento County	984	$560,000	14 days	6.9 months
Santa Clara County	813	$2,050,000	14 days	6.9 months
Alameda County	704	$1,390,000	14 days	6.9 months
Contra Costa County	733	$920,000	16 days	7.0 months
San Diego County	1,380	$1,077,750	20 days	7.1 months
Placer County	491	$700,000	23 days	7.2 months
Orange County	1,190	$1,452,500	34 days	7.6 months
Kern County	573	$410,000	37 days	7.7 months
Los Angeles County	3,090	$1,040,000	38 days	7.7 months
Fresno County	524	$435,000	42 days	7.9 months
San Bernardino County	1,262	$550,500	45 days	8.0 months
Riverside County	1,841	$636,000	48 days	8.1 months

Confirm the licence, or confirm on the record that none is required for this loan type. How to verify a lender.
Establish which of the four gates your loan goes through, because that decides which rate limit applies.
Score your term sheet against the 14 red flags.
Price the loan on total cost, not rate. True-cost calculator.