Non-Recourse Construction Loans

Many real estate developers will utilize lending instruments that are secured by the property itself instead of the personal assets of the developers. These loans are typically utilized to complete construction projects that have run out of capital. Or, they may be made available for ground up construction for qualified sponsors.

By offering non-recourse loans, lenders have found a way to greatly increase their appeal to creditworthy sponsors who simply don’t want to be personally liable for projects that go wrong.

One of the downsides of the non-recourse structure from the borrowers perspective is that they likely will not be able to borrow as much money on the property as they would be able to if they went through a bank. This is so that the lender can mitigate their risk and get the majority (or all) of their money back by selling off the property if the project fails.

There are a small number of lenders that have emerged as leaders for non-recourse loans. If you are a qualified sponsor and looking for a large commercial loan of $5M or more, give us an explanation of your project and your background in commercial real estate development and we’ll put you in contact with the firm that is the best fit.

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Non-recourse loan rates

Rates on non-recourse construction loans will be lower than they are on traditional loans and the lender may also require that the loan be converted to a permanent loan once construction is complete.

For qualified sponsors looking for bridge loans or construction loans at reasonable terms, non-recourse loans can still be made at reasonable interest rates. Most lenders would rather secure their capital with the property as opposed to the lenders personal assets. These loans are made by corporations that know the commercial real estate development industry and are able to mitigate their risk while also providing reasonable terms for the borrowers.


If you are interested in learning more about commercial construction loans and how they are secured, read our commercial real estate construction loans article.

Land as collateral

Time is money for developers. If you are like most real estate developers that are looking for capital, it is not just important to find favorable terms, it is important to work with firms that you can count on to close and to provide funding quickly. In order to get your loan closed in an optimal time frame, it is important to understand what documentation you should have together and how the loan will be secured. 

At a minimum, you’ll need to be able to show yours (and your companies or partners) track record with this type of real estate development, show the deed to the property, share your financial models and pro formas to show what your costs will be and your projections for close. At MML, we have a database of lenders that can fund any reasonable deal.