What is the meaning of non-recourse financing or limited recourse financing in Project finance?



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I have seen about RECOURSE DEBT which means the debt which gives protection to lender and company offering recourse debt has lower cost of capital. But what does the term mean non-recourse debt. I have seen many explanations but no clear cut explanation.

1 Answer(s)


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Nonrecourse financing is debt where the loan is completely secured by collateral, which is often real estate. In case of default, the borrower is not liable because the lender is limited to collateral pledged for that loan—the lender has “no recourse” to the borrower’s other assets.
Although the benefits of such financing are obvious such financing comes at a cost. Lenders often seek other credit guarantees and will almost certainly charge more for the loan than with more traditional, recourse financing.