A hard money lender lends on the value of the assets to be acquired. So something like Andre's scenario might make sense. You'd lend the money and then take either first position or (if necessary) second position. Your $4,000 would be secured by whatever the property is worth. And if it's worth more than $8,000, then you'd be in pretty good shape.
But how would you do hard money loans on "small projects"? Around where I live (and it might be different in Cleveland) $4,000 might be the amount someone would need to rehab a couple of half baths. Or put a new roof on a small house or townhouse. I suppose you could secure your loan with a second mortgage on the person's property, assuming there's sufficient equity in the property.
Another question: If the homeowner can't come up with $4,000--or, more likely, finance it through the company doing the work--are you really confident the borrower will be able to repay you?
There's nothing wrong with being a hard money lender, but you have to make sure you're making the right loans to the right people, and that you're securing the loans the right way.
Hope that helps.