Non-Recourse Debt

AAA

DEFINITION of 'Non-Recourse Debt'

A type of loan that is secured by collateral, which is usually property. If the borrower defaults, the issuer can seize the collateral, but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount. This is one instance where the borrower does not have personal liability for the loan.

BREAKING DOWN 'Non-Recourse Debt'

These types of projects are characterized by high capital expenditures, long loan periods and uncertain revenue streams. Analyzing them requires a sound knowledge of the underlying technical domain as well as financial modeling skills.

RELATED TERMS
  1. Recourse

    A legal agreement by which the lender has the rights to pledged ...
  2. Non-Notification Loan

    A full-recourse loan that is securitized by accounts receivable ...
  3. Non-Recourse Expense

    An accounting term that sometimes refers to the cost of absorbing ...
  4. Full Recourse Debt

    A guarantee that no matter what happens, the borrower will repay ...
  5. Project Finance

    Defined by the International Project Finance Association (IPFA) ...
  6. Non-Recourse Finance

    A loan where the lending bank is only entitled to repayment from ...
Related Articles
  1. Investing

    Off-Balance-Sheet Entities: An Introduction

    The theory and practice of these entities varies greatly. Investors need to learn what they're getting into.
  2. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  3. Technical Indicators

    Key Financial Ratios to Analyze Retail Banks

    Learn about key financial metrics that investors use to evaluate retail banks, and how the industry is fundamentally different from most other industries.
  4. Economics

    What Does a Merchant Bank Do?

    A merchant bank is a financial institution that performs underwriting, loan services, financial advising and fund raising services to large corporations.
  5. Economics

    The 3 Biggest Canadian Banks

    Examine some of the largest banks in Canada, which also rank among the largest and most important banks in the industry worldwide.
  6. Economics

    The 4 Biggest Chinese Banks

    Learn how the Chinese banking system is operated and managed, and get information about the top four largest banks in the country.
  7. Economics

    What's an Irrevocable Letter of Credit?

    An irrevocable letter of credit (ILOC) is a financing vehicle used to facilitate commerce between two parties who are not familiar with one another.
  8. Entrepreneurship

    The 4 Best Websites For Small Business Loans

    Discover some of the best websites that small business owners utilize to obtain necessary financing at competitive interest rates.
  9. Entrepreneurship

    Small Business Loan Vs Line of Credit: How They Differ

    Understand the differences between a small business loan and a line of credit, and learn some of the most appropriate uses for each form of financing.
  10. Entrepreneurship

    Steps to Qualify For a Small Business Loan

    Learn steps to qualify for a small business loan such as identifying financing needs, preparing a business plan and getting required documents.
RELATED FAQS
  1. Can I use my self-directed IRA to take out a loan?

    A self-directed IRA is a versatile financial resource for retirement. Under some circumstances, you can use it to take out ... Read Full Answer >>
  2. What is the difference between a non-recourse loan and a recourse loan?

    The essential difference between a recourse and non-recourse loan has to do with which assets a lender can go after if a ... Read Full Answer >>
  3. How does investment banking differ from commercial banking?

    Investment banking and commercial banking are two primary segments of the banking industry. Investment banks facilitate the ... Read Full Answer >>
  4. Why do commercial banks borrow from the Federal Reserve?

    Commercial banks borrow from the Federal Reserve primarily to meet reserve requirements when their cash on hand is low before ... Read Full Answer >>
  5. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  6. What role does a correspondent bank play in an international transaction?

    A correspondent bank is most typically used in international buy, sell or money transfer transactions to facilitate foreign ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  2. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  3. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  4. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  5. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  6. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!