Commercial property loans that make use of real estate as collateral are a little different from residential real estate loans.
Commercial property loans are a lot like residential property loans, except that the collateral is a commercial building rather than a residence. Usually a business will take on a commercial property loan, rather than an individual.
The borrower can be a corporation, limited liability company, or even a partnership. This makes the assessment of the credit of the buyer much more difficult than it is with residential property loans.
Some commercial property loans are nonrecourse, meaning that in the event of default in repayment, the creditor can only seize the collateral, but has no further claim against the borrower for any remaining deficiency. This is a contrast to the norm with residential property loans, in which a lender can usually seize other assets of the borrower in the event of non-payment.
Many times the loan can be supplemented by a personal guarantee from the owner of a property, which makes the debt payable in full even if foreclosure on the mortgaged collateral does not satisfy the outstanding balance.
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