CMBS Loans vs. Portfolio Loans

There are a plethora of different loan options on the market for personal and business use, and when you are looking into funding it can be difficult to get started, especially if this is the first time you have ever really needed to get a loan. Different loans have a lot of key differences, so it is important to know what those are. For example, here are some ways that a CMBS loan is different than a portfolio loan.


The first difference is in the flexibility of the different loan types. A portfolio loan is going to be more flexible in terms of collateral, interest, additional lending and other key components of the loan agreements, because the lender of these loans is not under the same rules as the lender of the CMBS options.


Another difference is that the CMBS options are usually non-recourse loans. However, the borrower and principals may still face recourse if they do something that is specifically mentioned in the loan documents as forbidden. That is why, even if your loan is non-recourse, it is important to read all of the terms of the loan to make sure that you are staying within guidelines.


Cash management will also vary between a portfolio loan and a CMBS loan. CMBS operates more with a lockbox mentality, which helps the lender control the cash collateral on the loan. However, this is not the case for portfolio loans. CMBS also allows property management control, which means that a lender can replace a property manager with one of their choosing, if they wish. Generally with the CMBS option the lenders usually have a lot more control over the situation than they would in the case of a portfolio loan.


There is another factor found in CMBS options that are not found with portfolio loans, and that is the SPE provision. This means that there are things standing between the borrower and the ability to file bankruptcy, and even if they succeed, the lender is most likely going to be the only one that gets anything out of it.


Because of these various differences in the two loans, it is important to make sure that you understand how different loans work and which one works best for your particular case. If you need a loan that allows more freedom a CMBS loan is not for you, but if you are secure in your financing and don’t mind a lender taking over some of your business, you may want to consider this type of loan.


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