Commercial Mortgage Quick Reference Guide
Recourse loans are loans that provide the personal guarantee of the person borrowing the money or the person(s) behind the entity borrowing the money. Recourse can benefit the borrower in that if he feels confident about putting his personal name and personal assets behind the loan, he can sometimes achieve better loan terms, but more often than not, recourse is required when a borrower or borrowing entity is not strong enough on its own, or if the property itself doesn't fall into a category that makes it conventional. Traditionally, for example, hard money loans, are full recourse. Either way recourse allows greater security for the entity lending the money.
With recourse loans, in the event of a default, in any capacity, usually in the form of falling behind on loan payments, the lender can seek financial damages from the borrower directly, so that if the investor does take a loss on the property it can go after the borrower individually for the balance of the money owed.
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