A commercial loan bank we talked to mentioned a limited guarantor loan for a commercial property. While I know what the loan means in general terms, what are the things that we should watch out for? I plan to talk to a real estate a lawyer. But any feedback on this will be helpful. Thanks
JayP,
Limited guarantor means the lender wants you to guarantee the top XX percent of the loan or guarantee the loan for XX years.
This is not a non-recourse loan. So you ARE putting your other assets at risk. That’s what commercial lenders do – they structure away the risk – for THEM. Not you.
You might ask a financial friend to put up the guarantee for a piece of the deal.
Ask the lender EXACTLY what they require. Don’t be shy. If the loan turns out to be one you don’t want, you’ll know more for the next time.
It’s free to ask the lender, but it costs $$ to ask a lawyer.
Keep us posted,
Mike
Thanks mhmike.
Yes I do understand that this is not a non-recourse loan and yes I have already asked questions of the lender and have asked them to spell out the details. I am especially looking out for waivers, any “bad boy” clauses etc. I was thinking about a lawyer just in case there is language in the terms that I do not understand or to understand any fine print thereof.
Here is a decent article on this. It is regarding a non-recourse loan but the clauses maybe applicable to limited guarantor loans as well: