For some people, personal recourse is almost a dirty word. It conjures up images of a greedy banker from the 1930’s repossessing a poor widow’s only asset, her home, while her beleaguered children look on in terror. In fact, the reality is much less minatory. Although we do not think about it much, anyone who has a mortgage on a private home, has already given recourse. The home itself provides security, but, if the home burns down, the obligation remains. Personal recourse is a standard aspect of all personal loans.
That is also the case with most mezzanine finance, at least in the middle market. In this instance, the loan goes to the entity, but the security provided by the business is “backstopped” by the personal guarantee of the individual owning or operating the business.
Loan facilities crafted by New York Private Finance are direct, personal loans and therefore involve personal recourse, almost by definition. We structure our loans with adequate security such that the risk of recourse is de minimis, but the obligation remains a personal one. In fact, from a lender’s point of view, one of the primary reasons for recourse is to ensure that, should something untoward happen, the borrower will be responsive, as we try to find a resolution satisfactory to all. In that sense, recourse becomes a mechanism to ensure timely communication rather than a blunt instrument designed to ensure repayment.
In the end, our borrowers are fiercely independent and are quite willing to accept recourse in preference to the kind of interference that senior debt at the corporate level or an infusion of equity can involve.
Please contact us to learn how we can help.
