Q: Can you differentiate between a limited recourse borrowing arrangement and a non-recourse loan. Are they the same thing?
The precise meaning of different terms will depend on the definitions contained in the contract that the loan provider requires a borrower to sign.
Generally speaking, however, limited recourse and non-recourse are used interchangeably because in both instances a borrower who defaults will only be liable against the asset used as security. The loan provider cannot make claims on other assets that the borrower may own.
In terms of the latest legislation relating to SMSF borrowing, the term in use is ‘limited recourse borrowing’.
For more information on SMSF borrowing see the following SuperGuide articles:
- Revisited: Is property a good investment for your SMSF?
- Property and super: What’s the deal? (15 popular Q & As)
- SMSFs for Beginners: Can my DIY super fund borrow money?
- SMSF investment: Borrowing to invest can be the means, not the end
- SMSF borrowing: Investing in property (what’s OK and NOT OK)
- SMSF investment: Where can I find information about SMSF borrowing?