A Surprising Number of Non-Recourse Options
We recently had the occasion to source non-recourse debt for a client. For those not familiar with the term, "non-recourse" refers to the lender's willingness to provide debt without personal guarantees, subject only to so-called "Bad Actor" provisions, which protect against borrower fraud or willful misconduct. In practice, non-recourse loans are secured only by the collateral they are funding.
Non-recourse loans are in contrast to so-called Bridge loans, which may also forego personal guarantees, but which are generally provided as a short-term solution while the borrower either repositions an asset or corrects some other temporary issue. Bridge loans also provide a relatively low LTV, requiring significant equity, and are expensive.
When we went to the market for our non-recourse loan to fund the purchase of two flex office/warehouses and one NNN franchise lease, I was surprised by the number of lenders quoting non-recourse options.
Terms were very attractive, with typical leverage and competitive rates and terms. I'm not sure how long these market conditions will last, but for borrowers seeking non-recourse loans today, we advocate an aggressive approach to sourcing the best options. We may be able to help you qualify for non-recourse debt, even if you haven't before.
A Caveat
In order to qualify for non-recourse debt, borrowers need to demonstrate strong net worth and liquidity, and the assets must be stabilized. For the right situation, however, such as NNN leases, we have seen non-recourse debt funding 100% of a project's costs, including construction of certain credit-rated tenants.
Other Options
Even if a non-recourse option is not available, there is plenty of capital in the current market for almost any need. Borrowers are best served by sound, experienced advice in getting to the optimal structure and responsive lending sources.
Contact Us
Axcel Capital Group provides non-recourse loans, as well as all other debt and equity structures for commercial real estate nationwide. Let us know how we can help with your financing needs.
Stephen Arrivello is President of Axcel Capital Group and can be reached at (215) 519-1010 or sa@axcelcap.com.