Recourse Loan

A recourse loan is a secured loan that gives the lender, in the event of a borrower default, the right to seize and sell the collateral to be repaid. In other words, the lender has recourse to the underlying collateral that acts as security. In the case of securitisation and project finance, where borrowings are undertaken via special purpose vehicles, debt is issued by the SPV so is non-recourse for investors. Investors can only claim recourse to the assets of the SPV and not the companies or banks that initiated the transactions.