A 'limited recourse' debt is a debt in which the creditor has limited claims on the loan in the event of default. Often a limited recourse debt contract is structured so that the debt transitions to unsecured, or 'non-recourse', debt pending the completion of a specific event. That event may be the completion of a project or the establishment of a specific revenue stream for which the debt was issued. Under certain conditions legal, financial, or other), lenders have access to the sponsors' credit or other legal security to fulfill a project’s debt obligations. There is usually recourse in the event of fraud, misrepresentation, or nondisclosure. For this reason, and because lenders often have some kind of recourse prior to completion, nonrecourse is often described as 'limited-recourse' financing.
