Why a Personal Financial Statement Matters for a Non-recourse loan

Tim Milazzo
June 23, 2020

Quick review: A “non-recourse” loan is one that is backed by collateral, but the borrower’s personal finances are not pledged against the loan amount.

If you want to know how to get one, we have a separate post here:

When seeking a non-recourse loan, you may still be asked to supply information about your personal finances. What gives?

What a Personal Financial Statement (PFS) shows

We’ll get back to the non-recourse lender perspective in a second. First, what does a PFS tell you about a borrower anyway?

Net Worth

A PFS will list out all of your assets and liabilities.

Assets include cash, stocks, bonds, properties, other investments, vehicles, or any other item owned that has a real value. Liabilities are debts or other amounts of money you owe or will owe in the future.

Your Net Worth is simply the sum value of your assets minus the sum value of your liabilities.


Liquidity describes how much cash or cash-equivalent assets you currently hold. It’s a helpful measure because it suggests how cash could be made available for a transaction at the current time.

How a Non-recourse Lender Incorporates the PFS

Now we’re back to how a Personal Financial Statement is considered for a non-recourse loan. Again, that means that these personal finances are not actually staked as collateral for the loan.

So why the heck do they matter? Why would a non-recourse lender even need to see personal finances?

“Bad boy” Carve-outs

Well, there are a few cases where a non-recourse lender can and will come after your personal finances to make good on a defaulted loan.

  1. Fraud
  2. Gross negligence
  3. Breaking the covenants of the loan

Essentially, if you do something that is illegal or disallowed by your loan, or fail to act in good faith, your non-recourse loan may still become a personal liability. These are typically described as “bad boy” carve-outs in the industry — language on your loan documents that describe the terms under which the loan becomes full recourse.

Ensuring a responsible borrower

A lender will also want to review a borrower’s Personal Financial Statement to gain a level of comfort that they have a responsible borrower. If they see huge liabilities and a negative net worth, that’s a negative signal that the borrower will be able to handle their loan safely and pay them back.


Many non-recourse lenders are regulated financial entities that must collect and file the PFS for their borrower, regardless of whether it will affect their credit decision.

How to prepare a Personal Financial Statement

There are two ways to prepare a Personal Financial Statement:

  1. Ask your Certified Public Accountant to do it. Note that they’ll need to have access to all of your financial information including bank accounts, investment accounts, and ledgers of all your other assets and liabilities.
  2. Fill out a PFS template yourself.

There are many different PFS templates available online. However, from what we’ve seen, there is not a publicly available version of the Personal Financial Statement paired with a useful version of the Schedule of Real Estate Owned, which is an important companion document specifically for real estate investors.

So we decided to build our own template combining the Personal Financial Statement with the Schedule of Real Estate Owned. This combined template is now available as a free download on the StackSource website: StackSource.com/PFS-template

Find the right commercial real estate financing with StackSource by getting instantly matched to the best debt and equity options for your project from our nationwide network of capital sources. 

Our expert Capital Advisors help you secure your ideal capital stack, resulting in a lower cost of capital for your investments in less time and with more transparency than a traditional commercial mortgage brokerage. Learn more at StackSource.com.