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    Recourse

    A loan feature that lets the lender pursue the borrower's personal assets if the collateral does not cover the debt.

    Recourse describes whether a lender can go after a borrower's personal assets beyond the pledged collateral. On a recourse loan, if a foreclosure sale does not cover the balance, the lender can pursue the borrower personally for the shortfall, usually through a personal guarantee.

    A non recourse loan limits the lender to the property itself. If the deal fails, the lender takes the collateral but cannot chase the borrower's other assets. Agency, CMBS, and life company loans are commonly non recourse, while most bank and SBA loans are full recourse.

    Even non recourse loans carry bad boy carve outs, exceptions for fraud, waste, unauthorized transfers, or bankruptcy that flip the loan to recourse. So non recourse protects against market losses, not misconduct.

    Formula
    Recourse lets a lender pursue personal assets; non recourse cannot
    Worked Example

    A borrower defaults on a $2,000,000 recourse loan, and the property sells for $1,700,000 at foreclosure. The lender can pursue the borrower personally for the $300,000 shortfall. On a non recourse loan, that shortfall would be the lender's loss.

    Why It Matters

    Recourse decides how much personal risk you carry. Non recourse protects your other assets but usually costs more or requires stronger metrics. It is one of the most important terms to negotiate.

    Related Terms

    Loan to Value Ratio (LTV)

    The loan amount as a percentage of a property's appraised value, showing how much of the purchase a lender will finance.

    Term Sheet

    A non binding summary of proposed loan terms a lender offers before formal underwriting.

    Capital Stack

    The layers of financing in a deal, ranked by repayment priority from senior debt to common equity.

    Mezzanine Debt

    Subordinate financing that sits between senior debt and equity, often secured by a pledge of ownership interests.

    Related Programs & Tools

    CMBS LoansAgency LoansSBA Loans

    Looking for another term? Browse the full commercial lending glossary.

    Frequently Asked Questions

    Agency multifamily, CMBS, and life company loans are commonly non recourse. Most bank loans and all SBA loans require a personal guarantee.

    They are exceptions that make a non recourse loan recourse if the borrower commits fraud, waste, unauthorized transfers, or files bankruptcy to block foreclosure.

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