Recourse Debt Versus Non-Recourse Debt in Commercial Real Estate

What is the Difference Between Recourse Debt and Non-Recourse Debt in Commercial Real Estate?

Recourse debt, also referred to as a recourse loan, refers to a debt where the lender can claim the borrower’s assets if he or she fails to pay back the debt to in full. 

Recourse debt can be broken down into two other debts. The first is a full recourse debt, which allows the lender to take whichever assets the lender claims, as long as it falls within the range of the debt. The second is a limited recourse debt, where only specific assets can be claimed.

Unlike recourse debt, with non-recourse loans the lender is only allowed to collect the collateral but has no right to go after the borrower’s other personal assets.

Although a recourse debt is more beneficial than a non-recourse debt for a lender, only those individuals and businesses with a good standing credit history can take advantage of this loan.

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