Limited Recourse Loan

A limited recourse loan restricts lender recovery to specific assets or scenarios, providing partial borrower protection while giving lenders targeted guarantees on key risks.

Recourse Carve-OutsGP Liability
Fraud or misrepresentationFull recourse to GP
Misappropriation of fundsFull recourse
Environmental violationsFull recourse if caused by borrower
Voluntary bankruptcyFull recourse
Waste of propertyFull recourse for negligence
Standard operating lossesNon-recourse, lender accepts risk
Limited vs Non-RecourseComparison
Non-recourseZero GP liability except fraud
Limited recourseGP liable for specific bad acts (carve-outs)
Full recourseGP personally liable for entire loan
CostNon-recourse most expensive, full recourse cheapest
Risk to borrowerNon-recourse lowest, full recourse highest
Typical for real estateLimited recourse is standard institutional loan

Related Terms

Non-Recourse LoanRecourseLender ProtectionBad Boy Carve-Outs

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