Finance Commercial Property in LLC no personal guarantee?

[Bellman Tumasang]

How do I finance a commercial property in an LLC with no personal guarantee?

A lot of people say oh you always need to personally guarantee because the lender wants to minimise their risk but I know it’s possible.

Is their loans secured by the property as long as it cash flows and is at the required DSCR such as 1.25 or above?

For example I’m pretty sure that when big companies finance real estate the executives don’t have to all guarantee the loan in their own personal name?

If lenders really force personal guarantees can’t I guarantee the loan in a company’s name?

If everyone guarantees a loan wouldn’t many people be bankrupt as markets are always going up and down?

I’ll really appreciate you guys answers thanks. Could you also share this question around to experts who may know because this is a serious learning barrier for me?

Thanks in advance.

[Charles Seaman]

@Bellman Tumasang most commercial assets with loan amounts over $1.0MM qualify for non-recourse loans.  Non-recourse means that the lender's only collateral is the property that they're lending on, assuming that you follow the rules and don't do anything illegal.  Recourse means that the borrower needs to personally guarantee the loan.

If you're looking at multifamily properties, many investors like to use agency debt (Fannie Mae or Freddie Mac). Another option is CMBS debt. Both of these options offer non-recourse loans. Arbor is one of the biggest direct lenders in the country. See the link below to an old article on their website that will help give you some clarification.

https://arbor.com/blog/fannie-mae-freddie-mac-or-banks-which-apartment-loan-is-best-for-you/