Structuring Non-Recourse Bridge Loan (Small Commercial Repositioning)
Member since 2025 · 23 posts · 7 votes
Structuring Non-Recourse Bridge Loan (Small Commercial Repositioning)
Most Popular Reply
Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes
6moAs a private lender who lends their own money, we can make or break any rules we want so long as they are within the bounds of the law. If you presented a deal like this to me, where you suggest you are taking advantage of low equity ownership in the LLC to claim a PG is "structurally misaligned," my initial reaction would be, "Nice try." There's no way on Earth I would agree to lend to an entity with no clear manager who is willing to take financial responsibility.
We require everyone with a 20% stake to sign a PG. If no one held that amount, we would not do the deal. And yes, I too am suspicious when a borrower won’t back up their loan.
I'm also having a hard time seeing $500K equity in a $1.2M loan against a $1.5M project cost. What is the purchase price, rehab estimate, and ARV? The greatest risk is not when the project is complete and stabilized, which is where you seem to be focused. It's greatest at the beginning. If the project went bad shortly after closing, or worse, halfway through, how much could we recover? There's no way to establish that from what you presented.
Unless you have been approved, there is no clear SBA 504 takeout at this point. Nor is the DSCR reliable right now. These are good exit strategies but irrelevant until the property is stabilized.
With no PG, asking about liquidity/net worth requirements is almost irrelevant because there is no way a lender could attach these. I could almost argue cynically that high net worth individuals are more inclined to walk away since you seem to imply everyone’s ownership stake is low in this project.
This could be a great deal. It’s hard to know. But, on its face, Chris, you seemed to have structured this to transfer much of the risk to the lender.
19 Replies
- 6moMike GrudzienPro MemberLender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
I want to see the answers!
- Member since 2025 · 23 posts · 7 votes6mo
Quote from @Mike Grudzien:
I want to see the answers!
Thanks Mike! I am hoping someone can chime in with an example of a deal they put together or a lender they work with who has that kind of flexibility.
- Lender · Indianapolis, IN · Member since 2019 · 53 posts · 19 votes6mo
As a lender, I see it primarily as shifting risk. I'm asking myself this question: Why would I loan $1.2M of my money for your project (at 80%+ LTV) when you won't personally back it up? My question to you is, why do you not want to offer a PG? Is this a project for your SDIRA/Solo K?
Perhaps, some lenders might consider it if you have some really good free & clear properties to cross collateralize.
- Member since 2025 · 23 posts · 7 votes6mo
Quote from @Alan Nelson:
As a lender, I see it primarily as shifting risk. I'm asking myself this question: Why would I loan $1.2M of my money for your project (at 80%+ LTV) when you won't personally back it up? My question to you is, why do you not want to offer a PG? Is this a project for your SDIRA/Solo K?
Perhaps, some lenders might consider it if you have some really good free & clear properties to cross collateralize.
I think we may be looking at this from slightly different baselines, so let me tighten a few points and then ask you more directly.
On leverage — I'm not seeing this as an 80%+ LTV deal.
On total project cost (~$1.5M–$1.6M) with ~$500K equity, we’re closer to ~70–75% LTC, and materially lower on stabilized value.So the question isn’t really “why no PG at high leverage,” it’s:
at what leverage and structure does a lender become comfortable removing the PG?On the guarantee point — this isn’t a reluctance issue.
The ownership is structured through an LLC with multiple investors and no majority member. I hold a minority position (~15%).So a full personal guarantee isn’t just undesirable — it’s structurally misaligned. No single member can reasonably guarantee the entire capital stack.
That’s really the core of what I’m trying to solve:
For a deal in this size range, with:
- meaningful equity (~30%+)
- defined repositioning plan
- strong DSCR on stabilization
- clear SBA 504 takeout
What does a lender actually need to see to get to non-recourse (or carveout-only)?
Specifically:
- Is this primarily a function of lower leverage (e.g., sub-70% LTC / LTV)?
- Liquidity / net worth at the sponsor group level?
- Debt fund vs bank execution?
- Or are you seeing lenders require some form of structured/limited guarantor regardless at this size?
Also curious — in your experience, are lenders in this range actually solving for risk through structure (reserves, basis, exit), or defaulting to guarantees because of deal size?
Trying to separate what’s market reality vs what’s just lender preference.
- 6moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 508 votes
It's a challenge to find a non recourse no personal guarantee loan unless there's a significant track record for the borrower in the same space. I've never heard of there being no personal guarantee in a situation like this whether for SBA, DSCR or other investment property loan products. The whole lending system and loans are built on measuring risk which is why someone with 780+ credit gets better loan terms compared to someone with a 620 credit score. The idea is that past borrower payment behavior predicts future borrower payment behavior. If there's no track record, the lender has no incentive to possibly lose over a million dollars on a loan. Usually there has to be a full personal guarantee from one of the LLC members. Some lenders require the LLC member be at least a 20% member. There might be a chance that someone who wants to do the loan who is private lender who can make his own rules would do a loan like this but not sure why that person would. The market reality is that a personal guarantee is standard and hard to get around unless the LLC has a long track record of success in this same space regarding property type and cost.
Bright Skyline518 Reviews- Member since 2025 · 23 posts · 7 votes6mo
Quote from @Stacy Raskin:
It's a challenge to find a non recourse no personal guarantee loan unless there's a significant track record for the borrower in the same space. I've never heard of there being no personal guarantee in a situation like this whether for SBA, DSCR or other investment property loan products. The whole lending system and loans are built on measuring risk which is why someone with 780+ credit gets better loan terms compared to someone with a 620 credit score. The idea is that past borrower payment behavior predicts future borrower payment behavior. If there's no track record, the lender has no incentive to possibly lose over a million dollars on a loan. Usually there has to be a full personal guarantee from one of the LLC members. Some lenders require the LLC member be at least a 20% member. There might be a chance that someone who wants to do the loan who is private lender who can make his own rules would do a loan like this but not sure why that person would. The market reality is that a personal guarantee is standard and hard to get around unless the LLC has a long track record of success in this same space regarding property type and cost.
I agree with you that personal guarantees are the default in most small balance commercial deals — no disagreement there.
Where I think we may be talking past each other is around how risk is actually being underwritten.
In consumer lending, credit profile is a primary driver because the borrower is the repayment source.
In a deal like this, the repayment source is the asset + business plan, and the lender is secured by the real estate. The borrower isn’t the collateral — the property is.
So the question I’m trying to get clarity on isn’t whether PGs are common (they are), but:
At what point does the deal itself carry enough weight that the lender relies on the asset rather than the individual?
For example:
- If leverage is reduced (say sub-70% LTC / LTV)
- If there is meaningful equity (~30%+)
- If there is a defined value-add plan with a clear exit (SBA takeout)
- If DSCR supports refinance at stabilization
At that point, the lender’s downside is not a “loss of $1M+” — it’s stepping into a well-below-basis asset and working through a liquidation or repositioning scenario.
That’s not a preferred outcome, but it’s fundamentally different from unsecured or consumer risk.
So I’m trying to understand from a practical standpoint:
- Are lenders in this size range actually making decisions based on asset-level risk (basis, LTV, exit), or is it still primarily borrower credit driven regardless of structure?
- Is there a threshold where PGs start to fall away (leverage, liquidity, track record, loan size)?
- Or is your experience that at this deal size (~$1.5M total project), lenders default to PGs regardless of how strong the collateral and structure are?
Not trying to push against how the market works — just trying to identify where structure can replace guarantees and where it realistically cannot.
- 6moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 508 votesMy experience is institutional lenders (so not a private individual lending money) default to personal guarantees unless there's a significant track record and even then it will be a challenge to not have a personal guarantee. I have seen this across multiple lenders as a mortgage broker that specializes in investment property lending. No personal guarantee if possible usually requires a significant track record with a similar type of asset class and usually requires a higher purchase price.
Quote from @Chris Anthony:
Quote from @Stacy Raskin:
It's a challenge to find a non recourse no personal guarantee loan unless there's a significant track record for the borrower in the same space. I've never heard of there being no personal guarantee in a situation like this whether for SBA, DSCR or other investment property loan products. The whole lending system and loans are built on measuring risk which is why someone with 780+ credit gets better loan terms compared to someone with a 620 credit score. The idea is that past borrower payment behavior predicts future borrower payment behavior. If there's no track record, the lender has no incentive to possibly lose over a million dollars on a loan. Usually there has to be a full personal guarantee from one of the LLC members. Some lenders require the LLC member be at least a 20% member. There might be a chance that someone who wants to do the loan who is private lender who can make his own rules would do a loan like this but not sure why that person would. The market reality is that a personal guarantee is standard and hard to get around unless the LLC has a long track record of success in this same space regarding property type and cost.
I agree with you that personal guarantees are the default in most small balance commercial deals — no disagreement there.
Where I think we may be talking past each other is around how risk is actually being underwritten.
In consumer lending, credit profile is a primary driver because the borrower is the repayment source.
In a deal like this, the repayment source is the asset + business plan, and the lender is secured by the real estate. The borrower isn’t the collateral — the property is.
So the question I’m trying to get clarity on isn’t whether PGs are common (they are), but:
At what point does the deal itself carry enough weight that the lender relies on the asset rather than the individual?
For example:
- If leverage is reduced (say sub-70% LTC / LTV)
- If there is meaningful equity (~30%+)
- If there is a defined value-add plan with a clear exit (SBA takeout)
- If DSCR supports refinance at stabilization
At that point, the lender’s downside is not a “loss of $1M+” — it’s stepping into a well-below-basis asset and working through a liquidation or repositioning scenario.
That’s not a preferred outcome, but it’s fundamentally different from unsecured or consumer risk.
So I’m trying to understand from a practical standpoint:
- Are lenders in this size range actually making decisions based on asset-level risk (basis, LTV, exit), or is it still primarily borrower credit driven regardless of structure?
- Is there a threshold where PGs start to fall away (leverage, liquidity, track record, loan size)?
- Or is your experience that at this deal size (~$1.5M total project), lenders default to PGs regardless of how strong the collateral and structure are?
Not trying to push against how the market works — just trying to identify where structure can replace guarantees and where it realistically cannot.
Bright Skyline518 Reviews - Member since 2025 · 23 posts · 7 votes6mo
Quote from @Stacy Raskin:
My experience is institutional lenders (so not a private individual lending money) default to personal guarantees unless there's a significant track record and even then it will be a challenge to not have a personal guarantee. I have seen this across multiple lenders as a mortgage broker that specializes in investment property lending. No personal guarantee if possible usually requires a significant track record with a similar type of asset class and usually requires a higher purchase price.Quote from @Chris Anthony:
Quote from @Stacy Raskin:
It's a challenge to find a non recourse no personal guarantee loan unless there's a significant track record for the borrower in the same space. I've never heard of there being no personal guarantee in a situation like this whether for SBA, DSCR or other investment property loan products. The whole lending system and loans are built on measuring risk which is why someone with 780+ credit gets better loan terms compared to someone with a 620 credit score. The idea is that past borrower payment behavior predicts future borrower payment behavior. If there's no track record, the lender has no incentive to possibly lose over a million dollars on a loan. Usually there has to be a full personal guarantee from one of the LLC members. Some lenders require the LLC member be at least a 20% member. There might be a chance that someone who wants to do the loan who is private lender who can make his own rules would do a loan like this but not sure why that person would. The market reality is that a personal guarantee is standard and hard to get around unless the LLC has a long track record of success in this same space regarding property type and cost.
I agree with you that personal guarantees are the default in most small balance commercial deals — no disagreement there.
Where I think we may be talking past each other is around how risk is actually being underwritten.
In consumer lending, credit profile is a primary driver because the borrower is the repayment source.
In a deal like this, the repayment source is the asset + business plan, and the lender is secured by the real estate. The borrower isn’t the collateral — the property is.
So the question I’m trying to get clarity on isn’t whether PGs are common (they are), but:
At what point does the deal itself carry enough weight that the lender relies on the asset rather than the individual?
For example:
- If leverage is reduced (say sub-70% LTC / LTV)
- If there is meaningful equity (~30%+)
- If there is a defined value-add plan with a clear exit (SBA takeout)
- If DSCR supports refinance at stabilization
At that point, the lender’s downside is not a “loss of $1M+” — it’s stepping into a well-below-basis asset and working through a liquidation or repositioning scenario.
That’s not a preferred outcome, but it’s fundamentally different from unsecured or consumer risk.
So I’m trying to understand from a practical standpoint:
- Are lenders in this size range actually making decisions based on asset-level risk (basis, LTV, exit), or is it still primarily borrower credit driven regardless of structure?
- Is there a threshold where PGs start to fall away (leverage, liquidity, track record, loan size)?
- Or is your experience that at this deal size (~$1.5M total project), lenders default to PGs regardless of how strong the collateral and structure are?
Not trying to push against how the market works — just trying to identify where structure can replace guarantees and where it realistically cannot.
That’s helpful context—and I think we’re actually getting closer to the real constraint.
I agree with you that at this deal size, most lenders default to personal guarantees. That’s been my experience as well.
Where I see the distinction is why that happens.
From what I’ve been reviewing, non-recourse bridge lending is very much alive in the market—it’s just concentrated with debt funds and institutional balance sheet lenders, typically in the $3M+ range and up.
Those groups are underwriting:
- transitional assets (lease-up, repositioning)
- with interest reserves / construction reserves
- often with no in-place DSCR
- and still structuring non-recourse with standard carve-outs
So they’re clearly solving for risk through:
basis, structure, and execution—not personal guarantees.Which is why I’m starting to think the real dividing line isn’t “whether non-recourse is viable,” but:
whether the smaller and private lenders have the infrastructure and underwriting model to manage that risk at smaller deal sizes.
At the sub-$2M range, it seems like many lenders:
- don’t have the margin or knowledge to underwrite that complexity
- or don’t want the operational burden of working out a deal if it goes sideways
So the PG becomes a simpler substitute for underwriting discipline.
That’s not a criticism—it’s just a different lending model.
But it does create an interesting gap in the market:
Deals with:
- strong equity (~30%+)
- conservative basis
- clear exit
- defined business plan
that could be underwritten like institutional bridge…
but fall below the size threshold where those lenders operate.So I guess the more precise question is:
In your experience, is there a clear deal size or loan amount where lenders start transitioning from “borrower-based underwriting” to “asset-based underwriting”?
Because everything I’m seeing suggests that shift happens—but not at this level.
If that’s the case, it’s less about whether the structure works, and more about matching the deal to the right capital source.
- 6moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 508 votes
Quote from @Chris Anthony:
Quote from @Stacy Raskin:
My experience is institutional lenders (so not a private individual lending money) default to personal guarantees unless there's a significant track record and even then it will be a challenge to not have a personal guarantee. I have seen this across multiple lenders as a mortgage broker that specializes in investment property lending. No personal guarantee if possible usually requires a significant track record with a similar type of asset class and usually requires a higher purchase price.Quote from @Chris Anthony:
Quote from @Stacy Raskin:
It's a challenge to find a non recourse no personal guarantee loan unless there's a significant track record for the borrower in the same space. I've never heard of there being no personal guarantee in a situation like this whether for SBA, DSCR or other investment property loan products. The whole lending system and loans are built on measuring risk which is why someone with 780+ credit gets better loan terms compared to someone with a 620 credit score. The idea is that past borrower payment behavior predicts future borrower payment behavior. If there's no track record, the lender has no incentive to possibly lose over a million dollars on a loan. Usually there has to be a full personal guarantee from one of the LLC members. Some lenders require the LLC member be at least a 20% member. There might be a chance that someone who wants to do the loan who is private lender who can make his own rules would do a loan like this but not sure why that person would. The market reality is that a personal guarantee is standard and hard to get around unless the LLC has a long track record of success in this same space regarding property type and cost.
I agree with you that personal guarantees are the default in most small balance commercial deals — no disagreement there.
Where I think we may be talking past each other is around how risk is actually being underwritten.
In consumer lending, credit profile is a primary driver because the borrower is the repayment source.
In a deal like this, the repayment source is the asset + business plan, and the lender is secured by the real estate. The borrower isn’t the collateral — the property is.
So the question I’m trying to get clarity on isn’t whether PGs are common (they are), but:
At what point does the deal itself carry enough weight that the lender relies on the asset rather than the individual?
For example:
- If leverage is reduced (say sub-70% LTC / LTV)
- If there is meaningful equity (~30%+)
- If there is a defined value-add plan with a clear exit (SBA takeout)
- If DSCR supports refinance at stabilization
At that point, the lender’s downside is not a “loss of $1M+” — it’s stepping into a well-below-basis asset and working through a liquidation or repositioning scenario.
That’s not a preferred outcome, but it’s fundamentally different from unsecured or consumer risk.
So I’m trying to understand from a practical standpoint:
- Are lenders in this size range actually making decisions based on asset-level risk (basis, LTV, exit), or is it still primarily borrower credit driven regardless of structure?
- Is there a threshold where PGs start to fall away (leverage, liquidity, track record, loan size)?
- Or is your experience that at this deal size (~$1.5M total project), lenders default to PGs regardless of how strong the collateral and structure are?
Not trying to push against how the market works — just trying to identify where structure can replace guarantees and where it realistically cannot.
That’s helpful context—and I think we’re actually getting closer to the real constraint.
I agree with you that at this deal size, most lenders default to personal guarantees. That’s been my experience as well.
Where I see the distinction is why that happens.
From what I’ve been reviewing, non-recourse bridge lending is very much alive in the market—it’s just concentrated with debt funds and institutional balance sheet lenders, typically in the $3M+ range and up.
Those groups are underwriting:
- transitional assets (lease-up, repositioning)
- with interest reserves / construction reserves
- often with no in-place DSCR
- and still structuring non-recourse with standard carve-outs
So they’re clearly solving for risk through:
basis, structure, and execution—not personal guarantees.Which is why I’m starting to think the real dividing line isn’t “whether non-recourse is viable,” but:
whether the smaller and private lenders have the infrastructure and underwriting model to manage that risk at smaller deal sizes.
At the sub-$2M range, it seems like many lenders:
- don’t have the margin or knowledge to underwrite that complexity
- or don’t want the operational burden of working out a deal if it goes sideways
So the PG becomes a simpler substitute for underwriting discipline.
That’s not a criticism—it’s just a different lending model.
But it does create an interesting gap in the market:
Deals with:
- strong equity (~30%+)
- conservative basis
- clear exit
- defined business plan
that could be underwritten like institutional bridge…
but fall below the size threshold where those lenders operate.So I guess the more precise question is:
In your experience, is there a clear deal size or loan amount where lenders start transitioning from “borrower-based underwriting” to “asset-based underwriting”?
Because everything I’m seeing suggests that shift happens—but not at this level.
If that’s the case, it’s less about whether the structure works, and more about matching the deal to the right capital source.
I think it varies by lender but generally it would be at least over $2.5M with a significant track record with $2.5M plus investment properties. It would still not be a given of no personal guarantee, it would make it a possibility. It also depends on the current market as market conditions change loan options. For example around the height of Covid, it was much more difficult time for self employed borrowers to be underwritten for conventional or debt to income loans.
Bright Skyline518 Reviews - Member since 2025 · 23 posts · 7 votes6mo
Quote from @Stacy Raskin:
Quote from @Chris Anthony:
Quote from @Stacy Raskin:
My experience is institutional lenders (so not a private individual lending money) default to personal guarantees unless there's a significant track record and even then it will be a challenge to not have a personal guarantee. I have seen this across multiple lenders as a mortgage broker that specializes in investment property lending. No personal guarantee if possible usually requires a significant track record with a similar type of asset class and usually requires a higher purchase price.Quote from @Chris Anthony:
Quote from @Stacy Raskin:
It's a challenge to find a non recourse no personal guarantee loan unless there's a significant track record for the borrower in the same space. I've never heard of there being no personal guarantee in a situation like this whether for SBA, DSCR or other investment property loan products. The whole lending system and loans are built on measuring risk which is why someone with 780+ credit gets better loan terms compared to someone with a 620 credit score. The idea is that past borrower payment behavior predicts future borrower payment behavior. If there's no track record, the lender has no incentive to possibly lose over a million dollars on a loan. Usually there has to be a full personal guarantee from one of the LLC members. Some lenders require the LLC member be at least a 20% member. There might be a chance that someone who wants to do the loan who is private lender who can make his own rules would do a loan like this but not sure why that person would. The market reality is that a personal guarantee is standard and hard to get around unless the LLC has a long track record of success in this same space regarding property type and cost.
I agree with you that personal guarantees are the default in most small balance commercial deals — no disagreement there.
Where I think we may be talking past each other is around how risk is actually being underwritten.
In consumer lending, credit profile is a primary driver because the borrower is the repayment source.
In a deal like this, the repayment source is the asset + business plan, and the lender is secured by the real estate. The borrower isn’t the collateral — the property is.
So the question I’m trying to get clarity on isn’t whether PGs are common (they are), but:
At what point does the deal itself carry enough weight that the lender relies on the asset rather than the individual?
For example:
- If leverage is reduced (say sub-70% LTC / LTV)
- If there is meaningful equity (~30%+)
- If there is a defined value-add plan with a clear exit (SBA takeout)
- If DSCR supports refinance at stabilization
At that point, the lender’s downside is not a “loss of $1M+” — it’s stepping into a well-below-basis asset and working through a liquidation or repositioning scenario.
That’s not a preferred outcome, but it’s fundamentally different from unsecured or consumer risk.
So I’m trying to understand from a practical standpoint:
- Are lenders in this size range actually making decisions based on asset-level risk (basis, LTV, exit), or is it still primarily borrower credit driven regardless of structure?
- Is there a threshold where PGs start to fall away (leverage, liquidity, track record, loan size)?
- Or is your experience that at this deal size (~$1.5M total project), lenders default to PGs regardless of how strong the collateral and structure are?
Not trying to push against how the market works — just trying to identify where structure can replace guarantees and where it realistically cannot.
That’s helpful context—and I think we’re actually getting closer to the real constraint.
I agree with you that at this deal size, most lenders default to personal guarantees. That’s been my experience as well.
Where I see the distinction is why that happens.
From what I’ve been reviewing, non-recourse bridge lending is very much alive in the market—it’s just concentrated with debt funds and institutional balance sheet lenders, typically in the $3M+ range and up.
Those groups are underwriting:
- transitional assets (lease-up, repositioning)
- with interest reserves / construction reserves
- often with no in-place DSCR
- and still structuring non-recourse with standard carve-outs
So they’re clearly solving for risk through:
basis, structure, and execution—not personal guarantees.Which is why I’m starting to think the real dividing line isn’t “whether non-recourse is viable,” but:
whether the smaller and private lenders have the infrastructure and underwriting model to manage that risk at smaller deal sizes.
At the sub-$2M range, it seems like many lenders:
- don’t have the margin or knowledge to underwrite that complexity
- or don’t want the operational burden of working out a deal if it goes sideways
So the PG becomes a simpler substitute for underwriting discipline.
That’s not a criticism—it’s just a different lending model.
But it does create an interesting gap in the market:
Deals with:
- strong equity (~30%+)
- conservative basis
- clear exit
- defined business plan
that could be underwritten like institutional bridge…
but fall below the size threshold where those lenders operate.So I guess the more precise question is:
In your experience, is there a clear deal size or loan amount where lenders start transitioning from “borrower-based underwriting” to “asset-based underwriting”?
Because everything I’m seeing suggests that shift happens—but not at this level.
If that’s the case, it’s less about whether the structure works, and more about matching the deal to the right capital source.
I think it varies by lender but generally it would be at least over $2.5M with a significant track record with $2.5M plus investment properties. It would still not be a given of no personal guarantee, it would make it a possibility. It also depends on the current market as market conditions change loan options. For example around the height of Covid, it was much more difficult time for self employed borrowers to be underwritten for conventional or debt to income loans.
Appreciate you sharing your perspective—that’s helpful context on how most lenders are approaching deals in this size range.
I’m starting to see a pattern around deal size and how underwriting shifts, so this has been useful.
I’d definitely be interested to hear from more lenders who are:
- actively originating or quoting bridge / repositioning deals
- and structuring around the asset (reserves, basis, exit) vs relying primarily on full personal guarantees
Especially if anyone has closed—or is currently quoting—deals in this lower to mid-size range with that approach.
Would be great to understand where and with who those executions are happening in today’s market.
Again, thanks for the input!
- 6moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 508 votes
Quote from @Chris Anthony:
Quote from @Stacy Raskin:
Quote from @Chris Anthony:
Quote from @Stacy Raskin:
My experience is institutional lenders (so not a private individual lending money) default to personal guarantees unless there's a significant track record and even then it will be a challenge to not have a personal guarantee. I have seen this across multiple lenders as a mortgage broker that specializes in investment property lending. No personal guarantee if possible usually requires a significant track record with a similar type of asset class and usually requires a higher purchase price.Quote from @Chris Anthony:
Quote from @Stacy Raskin:
It's a challenge to find a non recourse no personal guarantee loan unless there's a significant track record for the borrower in the same space. I've never heard of there being no personal guarantee in a situation like this whether for SBA, DSCR or other investment property loan products. The whole lending system and loans are built on measuring risk which is why someone with 780+ credit gets better loan terms compared to someone with a 620 credit score. The idea is that past borrower payment behavior predicts future borrower payment behavior. If there's no track record, the lender has no incentive to possibly lose over a million dollars on a loan. Usually there has to be a full personal guarantee from one of the LLC members. Some lenders require the LLC member be at least a 20% member. There might be a chance that someone who wants to do the loan who is private lender who can make his own rules would do a loan like this but not sure why that person would. The market reality is that a personal guarantee is standard and hard to get around unless the LLC has a long track record of success in this same space regarding property type and cost.
I agree with you that personal guarantees are the default in most small balance commercial deals — no disagreement there.
Where I think we may be talking past each other is around how risk is actually being underwritten.
In consumer lending, credit profile is a primary driver because the borrower is the repayment source.
In a deal like this, the repayment source is the asset + business plan, and the lender is secured by the real estate. The borrower isn’t the collateral — the property is.
So the question I’m trying to get clarity on isn’t whether PGs are common (they are), but:
At what point does the deal itself carry enough weight that the lender relies on the asset rather than the individual?
For example:
- If leverage is reduced (say sub-70% LTC / LTV)
- If there is meaningful equity (~30%+)
- If there is a defined value-add plan with a clear exit (SBA takeout)
- If DSCR supports refinance at stabilization
At that point, the lender’s downside is not a “loss of $1M+” — it’s stepping into a well-below-basis asset and working through a liquidation or repositioning scenario.
That’s not a preferred outcome, but it’s fundamentally different from unsecured or consumer risk.
So I’m trying to understand from a practical standpoint:
- Are lenders in this size range actually making decisions based on asset-level risk (basis, LTV, exit), or is it still primarily borrower credit driven regardless of structure?
- Is there a threshold where PGs start to fall away (leverage, liquidity, track record, loan size)?
- Or is your experience that at this deal size (~$1.5M total project), lenders default to PGs regardless of how strong the collateral and structure are?
Not trying to push against how the market works — just trying to identify where structure can replace guarantees and where it realistically cannot.
That’s helpful context—and I think we’re actually getting closer to the real constraint.
I agree with you that at this deal size, most lenders default to personal guarantees. That’s been my experience as well.
Where I see the distinction is why that happens.
From what I’ve been reviewing, non-recourse bridge lending is very much alive in the market—it’s just concentrated with debt funds and institutional balance sheet lenders, typically in the $3M+ range and up.
Those groups are underwriting:
- transitional assets (lease-up, repositioning)
- with interest reserves / construction reserves
- often with no in-place DSCR
- and still structuring non-recourse with standard carve-outs
So they’re clearly solving for risk through:
basis, structure, and execution—not personal guarantees.Which is why I’m starting to think the real dividing line isn’t “whether non-recourse is viable,” but:
whether the smaller and private lenders have the infrastructure and underwriting model to manage that risk at smaller deal sizes.
At the sub-$2M range, it seems like many lenders:
- don’t have the margin or knowledge to underwrite that complexity
- or don’t want the operational burden of working out a deal if it goes sideways
So the PG becomes a simpler substitute for underwriting discipline.
That’s not a criticism—it’s just a different lending model.
But it does create an interesting gap in the market:
Deals with:
- strong equity (~30%+)
- conservative basis
- clear exit
- defined business plan
that could be underwritten like institutional bridge…
but fall below the size threshold where those lenders operate.So I guess the more precise question is:
In your experience, is there a clear deal size or loan amount where lenders start transitioning from “borrower-based underwriting” to “asset-based underwriting”?
Because everything I’m seeing suggests that shift happens—but not at this level.
If that’s the case, it’s less about whether the structure works, and more about matching the deal to the right capital source.
I think it varies by lender but generally it would be at least over $2.5M with a significant track record with $2.5M plus investment properties. It would still not be a given of no personal guarantee, it would make it a possibility. It also depends on the current market as market conditions change loan options. For example around the height of Covid, it was much more difficult time for self employed borrowers to be underwritten for conventional or debt to income loans.
Appreciate you sharing your perspective—that’s helpful context on how most lenders are approaching deals in this size range.
I’m starting to see a pattern around deal size and how underwriting shifts, so this has been useful.
I’d definitely be interested to hear from more lenders who are:
- actively originating or quoting bridge / repositioning deals
- and structuring around the asset (reserves, basis, exit) vs relying primarily on full personal guarantees
Especially if anyone has closed—or is currently quoting—deals in this lower to mid-size range with that approach.
Would be great to understand where and with who those executions are happening in today’s market.
Again, thanks for the input!
Sure, you're welcome!
Bright Skyline518 Reviews
- Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes6mo
As a private lender who lends their own money, we can make or break any rules we want so long as they are within the bounds of the law. If you presented a deal like this to me, where you suggest you are taking advantage of low equity ownership in the LLC to claim a PG is "structurally misaligned," my initial reaction would be, "Nice try." There's no way on Earth I would agree to lend to an entity with no clear manager who is willing to take financial responsibility.
We require everyone with a 20% stake to sign a PG. If no one held that amount, we would not do the deal. And yes, I too am suspicious when a borrower won’t back up their loan.
I'm also having a hard time seeing $500K equity in a $1.2M loan against a $1.5M project cost. What is the purchase price, rehab estimate, and ARV? The greatest risk is not when the project is complete and stabilized, which is where you seem to be focused. It's greatest at the beginning. If the project went bad shortly after closing, or worse, halfway through, how much could we recover? There's no way to establish that from what you presented.
Unless you have been approved, there is no clear SBA 504 takeout at this point. Nor is the DSCR reliable right now. These are good exit strategies but irrelevant until the property is stabilized.
With no PG, asking about liquidity/net worth requirements is almost irrelevant because there is no way a lender could attach these. I could almost argue cynically that high net worth individuals are more inclined to walk away since you seem to imply everyone’s ownership stake is low in this project.
This could be a great deal. It’s hard to know. But, on its face, Chris, you seemed to have structured this to transfer much of the risk to the lender.
- Member since 2025 · 23 posts · 7 votes6mo
Quote from @Jeff S.:
As a private lender who lends their own money, we can make or break any rules we want so long as they are within the bounds of the law. If you presented a deal like this to me, where you suggest you are taking advantage of low equity ownership in the LLC to claim a PG is "structurally misaligned," my initial reaction would be, "Nice try." There's no way on Earth I would agree to lend to an entity with no clear manager who is willing to take financial responsibility.
We require everyone with a 20% stake to sign a PG. If no one held that amount, we would not do the deal. And yes, I too am suspicious when a borrower won’t back up their loan.
I'm also having a hard time seeing $500K equity in a $1.2M loan against a $1.5M project cost. What is the purchase price, rehab estimate, and ARV? The greatest risk is not when the project is complete and stabilized, which is where you seem to be focused. It's greatest at the beginning. If the project went bad shortly after closing, or worse, halfway through, how much could we recover? There's no way to establish that from what you presented.
Unless you have been approved, there is no clear SBA 504 takeout at this point. Nor is the DSCR reliable right now. These are good exit strategies but irrelevant until the property is stabilized.
With no PG, asking about liquidity/net worth requirements is almost irrelevant because there is no way a lender could attach these. I could almost argue cynically that high net worth individuals are more inclined to walk away since you seem to imply everyone’s ownership stake is low in this project.
This could be a great deal. It’s hard to know. But, on its face, Chris, you seemed to have structured this to transfer much of the risk to the lender.
I appreciate the directness — that’s helpful.
I think where we’re diverging is less about the deal itself and more about the type of capital being referenced.
From what I’ve been digging into, non-recourse bridge lending isn’t theoretical — it’s just concentrated in a different part of the market.
For example, a number of national bridge platforms (debt funds / mortgage REITs) are actively originating:
- non-recourse bridge loans with standard carve-outs
- leverage in the ~60%–80% LTC/LTV range
- transitional business plans (lease-up, repositioning, etc.)
In many of those cases:
- in-place DSCR is not required
- interest reserves are used to carry the asset
- underwriting is tied to basis, business plan, and exit, not personal credit
That’s consistent across groups like Ready Capital, Greystone (bridge-to-agency), and Trez Capital, among others.
Where I agree with you is that:
- those lenders are typically operating at larger loan sizes
- and often require structure around completion / carry / carve-outs
Which is really the crux of what I’m trying to isolate:
Is the constraint here actually risk… or deal size and lender type?
Because from a structure standpoint:
- ~30% equity
- sub-75% cost basis
- defined value-add plan
- clear takeout path
those are the same variables those lenders are underwriting against.
On the ownership structure — I understand your point, but I’d frame it slightly differently:
It’s not about avoiding responsibility, it’s about aligning it correctly.
In institutional structures, the “responsibility” is typically handled through:- SPE borrower
- carve-out guarantees
- completion / carry guarantees (if applicable)
- and control provisions
—not a blanket full recourse across minority investors.
So I think the more precise question is:
At this deal size (~$1.5M total capitalization), does the market simply not support that structure… or is it that most lenders in this range aren’t set up to underwrite that way?
If the answer is “this only works at $3M+ with debt funds,” that’s a very useful boundary to understand.
Trying to separate what’s structurally possible in the market vs what fits within a specific lending model.
- Member since 2025 · 23 posts · 7 votes6mo
Quote from @Jeff S.:
As a private lender who lends their own money, we can make or break any rules we want so long as they are within the bounds of the law. If you presented a deal like this to me, where you suggest you are taking advantage of low equity ownership in the LLC to claim a PG is "structurally misaligned," my initial reaction would be, "Nice try." There's no way on Earth I would agree to lend to an entity with no clear manager who is willing to take financial responsibility.
We require everyone with a 20% stake to sign a PG. If no one held that amount, we would not do the deal. And yes, I too am suspicious when a borrower won’t back up their loan.
I'm also having a hard time seeing $500K equity in a $1.2M loan against a $1.5M project cost. What is the purchase price, rehab estimate, and ARV? The greatest risk is not when the project is complete and stabilized, which is where you seem to be focused. It's greatest at the beginning. If the project went bad shortly after closing, or worse, halfway through, how much could we recover? There's no way to establish that from what you presented.
Unless you have been approved, there is no clear SBA 504 takeout at this point. Nor is the DSCR reliable right now. These are good exit strategies but irrelevant until the property is stabilized.
With no PG, asking about liquidity/net worth requirements is almost irrelevant because there is no way a lender could attach these. I could almost argue cynically that high net worth individuals are more inclined to walk away since you seem to imply everyone’s ownership stake is low in this project.
This could be a great deal. It’s hard to know. But, on its face, Chris, you seemed to have structured this to transfer much of the risk to the lender.
I appreciate your earlier response—it was direct and helpful, especially your point that the primary risk is at the front end, not at stabilization.
I’d like to re-engage and get your perspective specifically from a private lender mindset. I understand this may not be your typical box, but your view on risk would be valuable.
Let me restate the deal more clearly from a risk standpoint:
- Total project cost: ~$1.5M–$1.6M
- Equity: $500K cash at closing (~30%+)
- Purchase: ~$1.2M–$1.3M (large parcel in high-traffic tourism corridor; underlying land supports basis)
- Renovation: ~$300K (defined scope, budget, and contingency)
- Interest reserve: 12–24 months fully funded
- Target leverage: ~65% LTV on acquisition basis
- Contractor: experienced GC with established scope and budget
- Structure: single managing member responsible for execution and decisions
- Exit strategy: refinance within ~12–13 months; if not achieved, property is listed for sale
I’ve tried to address the primary risks—capital to carry, capital to complete, and conservative basis—but I want to pressure-test this from a lender’s perspective.
Where I’d value your input:
1. Day 1 Risk
If the deal underperformed immediately after closing, what would you need to see in place to feel protected?2. Recovery Analysis
How do you evaluate downside scenarios such as:- As-is value vs purchase basis
- Mid-renovation / partially completed state
- Expected recovery percentage in a forced sale
3. Structure vs Recourse
In the absence of a full personal guarantee, what elements provide sufficient comfort?- Lower basis relative to value
- Increased equity contribution
- Controlled draw process / construction oversight
- Liquidity or reserves at the entity level
4. “Lendable” Threshold
At what point does a deal like this become financeable in your view, even if outside your typical model?I’m not trying to avoid responsibility—I’m trying to understand how to structure the deal so the lender is protected by the asset and execution, not solely the guarantor.
Appreciate any perspective you’re willing to share.
- 6moDoug SmithPro MemberLender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
The only times we do non-recourse is 1) when you have a non-profit which means there really isn't a guarantor available, 2) the borrower is a publicly-traded company, or 3) it's a CMBS deal. People ask that periodically and I always ask "you aren't willing to guaranty it? You are planning to pay it back, aren't you?" It the borrower isn't willing to take the risk and guaranty it, why should you? Unless the deal falls under one of the three categories above, then we won't do it.
- Member since 2025 · 23 posts · 7 votes6mo
Quote from @Doug Smith:
The only times we do non-recourse is 1) when you have a non-profit which means there really isn't a guarantor available, 2) the borrower is a publicly-traded company, or 3) it's a CMBS deal. People ask that periodically and I always ask "you aren't willing to guaranty it? You are planning to pay it back, aren't you?" It the borrower isn't willing to take the risk and guaranty it, why should you? Unless the deal falls under one of the three categories above, then we won't do it.
I appreciate the perspective — and I agree that what you’re describing reflects how a large portion of the lending market approaches these deals.
My intent with the question wasn’t to debate whether guarantees are common, but to better understand where the market allows for risk to be structured differently — particularly at this deal size.
From some of the feedback here, it seems there are private lenders and specialty bridge groups willing to underwrite the asset more directly, using tools like lower leverage, fully funded interest reserves, controlled construction draws, and defined exit enforcement to mitigate risk rather than relying primarily on a full personal guarantee.
That doesn’t remove risk — it just reallocates how it’s managed.
I’m simply trying to understand where those structures are actually getting done in today’s market and what specific thresholds make them workable.
- Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes5mo
This is a solid setup $1.5M–$1.6M total cost with ~$500K equity, lease-up component, and a clear SBA 504 exit is exactly how a lot of these smaller commercial deals are getting structured right now.
On the non-recourse side, at this loan size, most traditional lenders will still lean toward some level of PG — but I’m seeing more flexibility with debt funds, especially when you’ve got:
– Strong equity in (~30%+)
– Defined lease-up plan with an anchor in place
– Clear refinance exit like you outlinedIn those cases, it’s not uncommon to structure with an SPE + bad boy carveouts, sometimes with limited recourse that burns off once stabilization targets are hit. Usually comes down to sponsor strength, liquidity, and how clean the exit looks.
I work with a few capital sources actively doing deals in this range, and this is very much within their box depending on how the sponsor profile lines up.
Happy to take a closer look at it or share how we’d structure it from the debt side.
What’s your experience level with similar lease-up or repositioning projects?
- 4moDenise WebsterBusiness MemberFinancial Advisor · Albuquerque, NM · Member since 2014 · 82 posts · 30 votes
Chris, this is a solid question because you’re thinking about structure before approaching capital, which is the right order.
At this deal size, I would expect many lenders to focus less on the stabilized DSCR at the end and more on the risk position at closing and during renovation/lease-up. The stabilized DSCR and SBA 504 takeout are helpful, but they are still future events until the property is improved, leased, and eligible for that refinance.
To make a limited-recourse or non-recourse conversation stronger, I’d tighten the package around:
(1) Current “as-is” value and downside liquidation value
(2) Purchase price versus total project cost
(3) Detailed renovation budget and contingency
(4) Tenant pre-commitment documentation
(5) Lease-up timeline and backup leasing assumptions
(6) Sponsor liquidity after closing
(7) Exit documentation supporting the SBA 504 refinance path
(8) Reserves for interest, taxes, insurance, delays, and tenant improvement overruns
The less personal guarantee you want, the more the lender will usually want strength somewhere else: lower leverage, stronger reserves, more equity, stronger sponsorship, better collateral coverage, or tighter controls over draws and lease-up milestones.
I would present it less as “how do we avoid a PG?” and more as “what structure makes the lender comfortable enough to limit recourse?” That framing usually leads to a more productive capital conversation.
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