Debt Financing
Debt financing for real estate
A real estate loan is the one contract that can reach past your LLC and take what the entity was built to protect. Nonrecourse does not mean what most borrowers think it means. A personal guarantee waives the shield by contract, for that debt, no matter how clean the LLC is. And the loan documents quietly outrank the operating agreement you spent months negotiating.
This pillar reads real estate debt from the borrower's side and the entity's: who lends, against what property, on what terms, papered in what documents, and where the loan and the LLC collide. It is the seam most advisors do not cross, because the banker does not read your operating agreement and your lawyer does not read your loan. You are the only one holding both. Equity raising, the other half of the capital stack, lives in syndication.
The terms of the loan are where the money and the risk actually live, so that is where this pillar starts.
TermsRate, amortization, coverage tests, recourse, covenants, and prepayment: the dials that decide whether a deal survives to payoff. The personal guaranteeThe one document that reaches past the LLC to you: what it waives, whether the lender comes for you first, and what survives the company. The seamsWhere the loan and the LLC collide: due-on-sale on transfer, the Article 8 opt-in versus charging orders, and the covenants that outrank your operating agreement. Red flagsThe clauses built to strip your ability to fight: confessions of judgment, portfolio-wide cross-default, merchant cash advances, and all-asset liens. Loan documentsThe closing stack is separate contracts, not one loan: the note and the lien, the environmental indemnity that outlives everything, the assignment of rents, the authority package. LendersWho lends, one page per lender type: community and national banks, credit unions and CDFIs, SBA 7(a) and 504, and the occupancy rule that routes you between them. Lifecycle of the loanThe loan in time order, from term sheet to foreclosure, and where the leverage sits at every stage: it runs backwards, highest before you sign and near zero after the receiver. Asset classesWhich lenders finance which property types, mapped class by class, and the three classes where the asset itself is the financing question: small rentals, owner-occupied buildings, and buying a business. The lender matrixEighteen lender types crossed against nine asset classes in one grid, every conditional yes footnoted to the rule behind it. Read down the column for your building. This is all free.
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