Recourse financing requires the borrower or borrowers to personally guarantee the funding amount against their own assets. This ensures that should the borrower default on the loan, lenders can seek financial damages from the borrowers directly. In some situations, a lender may originate recourse financing that may transition into a nonrecourse loan once certain conditions have been met. For example, let’s say an investor takes a recourse loan to acquire and upgrade a dated multifamily asset. The lender may stipulate that the financing can become a nonrecourse loan once the property has stabilized at, say, an occupancy rate of 90% or higher for a three-month period following capital improvements. In most situations, the asset will also need to achieve a certain debt service coverage ratio, or DSCR, during that same timeframe: usually 1.20x or 1.25x.