Relationship-First Lending
Commercial banks and credit unions are typically local and regional institutions, and they lend the way community lenders always have: through relationships. A bank wants to know you and trust you before it commits capital — it cares about your track record, your local market knowledge, and often an existing deposit relationship, not just the deal on paper.
Recourse: The Personal Guarantee
Most bank and credit union loans are recourse, meaning they require a personal guarantee. If the loan defaults and the property's value doesn't cover the outstanding balance, the borrower is personally responsible for the shortfall. This is one of the biggest tradeoffs borrowers weigh when comparing a bank loan to non-recourse options like CMBS or agency debt.
Pricing and Leverage
Banks typically size loans to 65-75% loan-to-value (LTV), with pricing set as a spread over SOFR (a floating-rate index) rather than a single fixed rate quoted upfront. Because the loan is recourse and relationship-based, banks can be flexible on structure for a borrower they know well, even if their leverage is more conservative than some other lender types.
Best-Fit Deals
Banks and credit unions are the natural home for smaller, stabilized, local deals and owner-occupied properties — a local business buying its own building, or a small stabilized retail strip a sponsor already operates in the bank's footprint. They are usually not the first call for large, complex, or out-of-market transactions.
Read the Guaranty Carefully
A recourse loan means the borrower's personal assets are on the line if the deal goes wrong — this is one of the first questions a sponsor should ask when comparing a bank quote to a non-recourse alternative.
Module Check
A local sponsor wants to buy a small, stabilized retail building they will occupy for their own business. Which lender type is the most natural fit?