FAQ - Are Commercial Real Estate Loans Non-recourse?
Didier Malagies • March 2, 2022
A commercial recourse or non-recourse loan depends on the lender, your assets, and the type of loan.
The choice between a recourse and a non-recourse commercial real estate loan is yours depending on your lender, your business's assets, and the loan type you choose. And this choice can make a big difference if you have a down turn in your business and cannot cover your loan. Here's what you should know!
Non-recourse Loans
Non-recourse loans take only collateral. The lender’s loss risk is essentially the value of the collateral. This means that if a borrower defaults on the commercial mortgage loan and the property’s sale price isn’t enough to repay lenders, then they are out of luck. They cannot come after the borrower for additional funds.
Non-recourse loans may have carve-outs. This means that there are some situations where a lender can go after personal assets if certain triggering events occur, such as fraud or misrepresentation by the borrower or an intentional default by the borrower.
It's easy to see why borrowers would prefer a non-recourse option over a recourse one. But lenders typically require more protection for non-recourse loans:
- Non-recourse loans may require a larger down payment than recourse loans.
- Non-recourse loans may have higher interest rates because of the additional risk involved for the lender.
- Non-recourse loans may have lower maximum loan amounts than recourse loans because of their higher risk.
Recourse Loans
In a recourse loan, both personal assets and business assets are collateral for repayment of the debt. This means that in addition to having claim against the collateral (the property) in case of default and foreclosure, lenders also have claim against all personal and business assets of borrowers and guarantors in case of default. In a recourse loan, banks can place liens on personal bank accounts and property.
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If you need working capital for your business, you’ve come to the right place. We can get you up to $150,000 in financing in as little as 2 weeks. And unlike traditional banks and other lenders, we are here to help you throughout the process to make sure you get funded. Our program is designed to give businesses like yours access to cash when they need it most. The best part? There is no cash flow analysis, no debt refi, no equipment requirement - just working capital. You can get 30% of your top line, gross revenue from your last tax returns. To qualify for the loan you will need: To be self-employed for 2 years. Have a 680 FICO score or higher. Have a 155 biz score or higher. Access to working capital can help your business in many ways: Working capital loans can help with covering payroll. Some businesses have cash flow problems because they have to pay their employees before they get paid. This can be a problem for startups, especially if the business owner is also an employee. Working capital loans can help you cover payroll and other expenses until you receive payment from clients. Working capital loans can help with buying inventory. The cost of inventory is one of the biggest expenses for most businesses. Working capital loans can help you buy inventory quickly and easily so that you don't have to wait for your customers to pay their bills before they can receive it. Working capital loans can help with rent and building expenses. Rent and building expenses are ongoing costs that must be paid every month regardless of whether or not there have been any sales in that month. Working capital loans help businesses pay these bills on time so that they don't fall behind. There is no obligation to start the lending processes. Just an obligation to yourself to figure out what's best for you. Find out more about how much you can borrow to help you finance your working capital! Complete the form below and one of our advisors will reach out to you. Or, give us a call at (727) 784-5555 and we will be happy to answer all of your questions.
The process of seeking a commercial loan in Florida can be overwhelming.
For doggy daycare owners and buyers, there are two main types of Government Subsidized Loans that can help you buy or grow your business .
The Small Business Administration (SBA) 504 loan is a long-term financing tool for growing small businesses.
The Small Business Administration (SBA) 504 loan is a long-term financing tool for growing small businesses.
Tax season is a great time to take stock of your company's financial situation and look ahead to the next year.
As a business owner, you need to know why commercial loans are important, how it works, and what is available to you.
Commercial real estate loans are similar to residential mortgages, but they usually require a shorter repayment period and a higher down payment.
For small business owners, there are three main types of commercial real estate loans: conventional commercial loans, SBA 7(a) loans and SBA 504 loans.
Check out our other helpful videos to learn more about credit and residential mortgages.
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