In most cases, the property being financed serves as the collateral for a real estate loan. In the case of a commercial real estate loan, however, the borrower may be required to make a personal guarantee as well in addition to a downpayment of 25% or more.
This means that if the business can’t make the loan payments and liquidating collateral (i.e., foreclosing on the property) doesn’t produce enough money to repay the loan, the borrower owner(s) who signed for the loan are personally responsible for covering the mortgage payments.
