Commercial property loans much like residential mortgage, use real estate as collateral for repayment.
Unlike residential property loans, a building will be used in order to secure repayment to the lender rather than a residence. A business will usually take on a commercial property loan, not an individual borrower.
A corporation, LLC, and even a partnership can borrow for a commercial property loan. This fact causes for the assessment of the credit of the borrower in a commercial mortgage to be much more difficult for the lender than it would be with a residential property loans borrower.
In some cases, commercial property loans are nonrecourse. What this means is that in the event of default in repayment, the creditor may only seize the collateral, and has no further claim against the borrower for any other assets. The reason for this is twofold: there are sometimes laws that significantly prevent the creditor from going after the borrower for any deficiency, and mortgages structured for sale as bonds will tend to give a higher priority to constantly receiving some sort of income and therefore require a clause that allows the lender to take the property immediately, regardless of bankruptcy proceedings that the borrower might be going through.
A commercial property loan can possibly be supplemented with a general obligation of the borrower, as well as with a personal guarantee from the owner of the property, which makes the debt payable in full, regardless of whether or not the foreclosure on the mortgaged collateral doesnt satisfy the outstanding balance.
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