Rates can also vary depending on whether the borrower receives a recourse or non-recourse loan. Lenders use different benchmarks for the different loan types.
Recourse debt holds the borrower personally liable for 100% of the debt, which often allows the borrower to have more flexibility to customize the loan structure and pricing. Recourse loans allow lenders to collect what is owed even after they have taken the collateral.
Non-recourse debt is exclusively secured by the collateral – in this case, the commercial property. If the borrower defaults, the lender can seize the collateral but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount.