Recourse
A loan where the borrower is personally liable for repayment beyond the value of the collateral property. Recourse loans are common for construction loans, bank loans, and smaller transactions. Full recourse means the borrower guarantees the entire loan; partial recourse or "burn-down" provisions may reduce the guarantee over time as loan risk decreases.
Related Terms
Non-Recourse
A loan structure where the lender's remedies in case of default are limited to the collateral property, and the borrower has no personal liability for any deficiency. Non-recourse loans are standard for CMBS, life company, and agency lending. They typically include "bad boy" carve-outs that make the loan recourse for fraud, misrepresentation, or environmental issues.
Construction Loan
Short-term financing used to fund the development of new commercial real estate projects. Construction loans are disbursed in draws as work is completed, with interest accruing only on funds advanced. They typically feature floating rates, 18-36 month terms, and require personal guarantees. Upon completion, the loan is paid off through permanent financing or sale.
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