Recourse vs. Non-Recourse Debt

Recourse debt allows the lender, on default, to pursue the borrower's other assets and any personal guaranty — not just the property securing the loan. Non-recourse debt limits the lender's remedy to the collateral itself; the borrower can lose the property but not their broader balance sheet.

How it's used: smaller and bank-held loans are usually recourse with a personal guaranty; larger institutional and agency loans (and most CMBS) are non-recourse. Non-recourse loans almost always carry "bad-boy" carve-outs — fraud, misappropriation, unauthorized transfers, bankruptcy — that spring the loan back to full recourse if the borrower misbehaves.

Why it matters: recourse is the difference between a deal that can fail and a sponsor who can fail with it. Non-recourse protects the borrower's other holdings but typically comes at a cost: a higher rate, lower LTV, or tighter DSCR and debt yield requirements. Read the carve-outs carefully — a poorly negotiated guaranty can erase the non-recourse protection you thought you had.

The choice shapes the risk of the senior layer of the capital stack. UpsideIQ models the loan terms; the recourse structure is a diligence item to confirm in the loan documents.