Last but not least, is the recourse wielding commercial bank. Like the life insurance company, it typically holds its loans, but banks, like First Bank, seek a deeper relationship with the borrower’s owners. A mentor always told me to “get nonrecourse when you need leverage and take recourse when you need terms.” Ways a guarantor can reduce their contingent liability includes limited repayment guaranties and/or recourse burn off provisions. Another method to limit personal recourse is the formation of a holding company to function as the guarantor. With the addition of financial covenants as a credit enhancement for the bank, this can be an attractive way for a guarantor to mitigate personal recourse liability.
As always, speak with any First Bank commercial loan officer or a trusted advisor to determine the best manner to structure your investment financing as well as the lender type that’s right for you.
Andrew Zinn possesses over 16 years of lending experience in commercial real estate with the ability to structure and close loans between $2M and $20M. Andrew holds a B.A. Degree in Economics and is an honors graduate from Pacific Coast Banking School.
ANDREW ZINN SENIOR VICE PRESIDENT S. CALIFORNIA COMMERCIAL REAL ESTATE (949) 475-6326 ANDREW.ZINN@FBOL.COM FIRSTBANKS.COM