A lender's right to collect a loan from the borrower or guarantor personally, beyond the property or other collateral pledged for it.
On a recourse loan the lender is not limited to the collateral. If the property is sold after a default and the sale does not cover the debt, the lender can pursue the guarantor for the difference, subject to state law.
Example: a loan balance of $2,000,000 and a foreclosure sale that nets $1,600,000 leaves a $400,000 shortfall. With full recourse the guarantor owes it. With a guaranty limited to 25 percent of the loan, the guarantor’s exposure stops at $500,000, which here still covers the whole shortfall.
Recourse comes in degrees. The OCC’s handbook for examiners lists guaranties limited to interest, to finishing construction or to part of the principal, and ones that step down or fall away as conditions are met. It expects a bank’s loan policy to set limits on partial recourse and non-recourse lending.
Who asks for what: SBA loans are recourse by rule, since each owner of 20 percent or more gives an unlimited guaranty. The OCC handbook notes that long-term fixed-rate loans from life insurance companies, pension funds and securitized lenders are commonly non-recourse. Banks and credit unions set their own policy, loan by loan.
How it shows up in the data here
Not in any public file. Call reports, credit union filings, HMDA and SBA records do not say whether a loan is recourse. Lender type is a rough guide and it is on every page here: filter the lender search by bank, credit union or non-bank, and ask each lender for its recourse terms before you send a full package.
Go further
- Search lenders by type: Banks, savings institutions, credit unions and non-bank lenders.
- Loan comps: Lenders that made loans like yours, by size and place.
- Guarantor strength and recourse, explained: A guaranty is the lender's second way out. Whether you sign one, how much it covers and what the lender checks before accepting it shape a commercial loan as much as the rate does.
- How bankers evaluate a commercial loan deal: A credit officer asks one question five ways: how will this loan be repaid, and what happens if it is not? Knowing the five tests lets you size a request before you send it.
Related terms
- Non-recourse loan: A loan the lender can collect only from the property pledged for it, not from the guarantor personally, except for listed bad acts.
- Carve-out guaranty: A guaranty on a non-recourse loan that makes the guarantor personally liable only if the borrower commits listed acts, such as fraud or a voluntary bankruptcy.
- Personal guaranty: A signed promise by an individual, usually an owner, to repay a business or real estate loan personally if the borrowing company does not.
- Guarantor: A person or company that promises to repay a loan if the borrower does not. On a loan to an LLC or corporation, the guarantor is usually an owner.
- Portfolio lender: A portfolio lender is a lender that keeps the loans it makes on its own books instead of selling them to an investor.
- CMBS conduit loan: A commercial property loan made to be pooled with other loans and sold to investors as commercial mortgage-backed securities, not kept by the lender that made it.
- Life company lender: A life insurance company that makes long-term, fixed-rate commercial mortgage loans with its own investment money and usually keeps them.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.