Get your Long Term Financing now with National Commercial Mortgage Funding, Inc. We specialize in Non-Recourse Hard Money Lending and have helped our customers secure loans over the years for assets such as Multi-family, Retail, Medical, Office, Industrial, Warehouses, and More!
What can We Offer?
Long term financing 5 to 10 year fixed rates from 4% to 6%
25 to 30 Year Amortization
Loan Amounts needed over 2mm
What is Non-Recourse Lending?
A non-recourse loan is ideally secured by the asset such as property and the kind of equity in the property. If at all the borrower fails to repay the loaned amount, the only way through which the lender can get back their investment is through the property. There are many financial criticisms that have come from different corners raising issues on the workability and validity of such a loan system. For instance, if the borrower can’t be held liable, to make good the borrowed amount in the event of a default there is really no reason that makes the borrower qualify for this type of loan.
In order to better understand non-recourse financing, I would like to share about the differences between recourse and the non-recourse kind of lending. Recourse loans ideally refer to the exact payment from a secondarily liable party when the first party defaults payment. Non-recourse loans on the other hand are based on an agreement where the lender does not have a right of recourse to the assets of the borrower beyond certain stated limits.
Based on this understanding, recourse does give the lenders much more guarantee that they would be repaid. If the borrower does not live up to the promise, they can also go after any guarantors who were signatories in the agreement. On the other hand, the non-recourse loans do put the borrower off the loan repayment hook. You can be exempted from paying such loans if at all you show evidence of financial inability.
The recourse platform is used by most traditional finance options. For the case of the alternative financing or non-traditional options, the loan funder has the ability to determine the recourse or non-recourse financing repayment platform. In such cases, the private lender does set their own lending and repayment guidelines that are based on experience and what they regard as being of importance to them.
These two types of loans vary mainly due to the kind of financing that is needed and the source of the funding. These loans also do work with assets that have been pledged when obtaining the loan. Types of assets that can be used for pledging these loans include real estate, or machinery. These constitute great collateral. The maximum loan to value ratio is used in gauging the worth of the asset in relation to the amount being borrowed. All this analysis depends entirely on the kind of assets that have been brought to table.
You will agree with me that non-recourse financing is more commonly used in private lending than in traditional lending platforms such as bank loans. This does not however mean that this applies to all financing transactions. There are many differences which have existed between these two lending aspects over the last couple of years. Most of the lenders across the globe are going the recourse way. This is because they are mostly left with unpaid loans. The loan agreement requirements have also changed greatly. You now have to provide a couple of documents such as legal status and identification when seeking any of these loans.
In the non-recourse loan agreement, there is not the same problem as there is in the recourse platform since collateral would stand for the unpaid amount. If at all you cannot repay the amount, the lender has the power to take control of the asset that was pledged as collateral for the loaned amount. For the case of recourse loans, the lender has the right to use all the available methods so as to get the amount paid and in time. If the direct borrower is not able to service the loan, guarantors would have to pay the price. Collateral does not play any role in such a case. The lender can even sue you because this is a legal agreement. This can lead to judgments and more so liens being levied. Remember that liens can be tied to business and personal assets. In such a case, your credit rating would be affected. This can injure your prospects for future loans. Of course there are many more aspects that entail non-recourse financing. Use the internet to find more information about these loans.