Non-Recourse Financing
Financing where the lender's only remedy in a default is the pledged collateral itself, with no personal or business liability beyond that asset.
Because the lender can’t pursue the borrower’s other assets or income if the collateral doesn’t cover the full balance, non-recourse financing is inherently riskier for the lender, which usually means stricter qualification standards or a lower loan-to-value ratio than a comparable recourse loan.
It’s more common in certain real estate and equipment transactions than in general small business lending, where most financing (including most SBA and bank loans) is structured with recourse and often a personal guarantee.
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