Structuring Non-Recourse Bridge Loan (Small Commercial Repositioning)

[Chris Anthony]

I’m evaluating a bridge acquisition + repositioning deal for a small commercial asset in a high-traffic tourism corridor.

• Total project cost: ~$1.5M–$1.6M
• Equity: ~$500K (~30%+)
• Loan: ~$1.2M–$1.275M
• Renovation + lease-up (3 tenants, 1 pre-committed anchor)
• Stabilized DSCR: ~1.35–1.6
• Clear SBA 504 refinance exit within 12–24 months

I’m exploring non-recourse or limited recourse structures.

Key question:
How are lenders currently structuring deals like this without full personal guarantees?

Specifically:

• Are lenders comfortable with SPE borrower + bad boy carveouts only at this size?
• What level of liquidity/net worth or sponsor profile is typically required?
• Are debt funds more realistic than banks for this structure?
• What adjustments (LTV, reserves, structure) typically remove the PG requirement?

Not looking to push risk—just trying to structure correctly from the outset.

Any insight is appreciated.

[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.