Conventional loans occupy a broader market niche than many borrowers realize:

Newer investors often find conventional loans more accessible than agency or CMBS products because the personal guaranty — rather than an extensive track record of ownership — can carry the underwriting. A borrower with strong personal liquidity and net worth can qualify even without a long history of commercial real estate ownership.

Owners of smaller or distressed assets benefit from the fact that conventional loans can be written at lower loan amounts than most government or securitized alternatives, and the personal guaranty structure makes financing distressed properties possible where purely asset-based underwriting would fall short.

Experienced investors who value speed and flexibility will appreciate that conventional loans move through underwriting faster than agency programs, without the federal review timelines that can delay closings by weeks or months.

Prepayment Provisions
Prepayment penalties sometimes are included and sometimes these are waived. The two most common structures are a flat-rate penalty — a fixed percentage of the outstanding balance — and a step-down penalty, which declines over time as the loan seasons. Step-down structures are more typical on shorter-term loans; longer-term loans may carry flat-rate penalties. Borrowers planning an early exit or anticipating a sale should negotiate prepayment terms carefully at origination rather than assuming flexibility later.

Personal Guaranty
The majority of conventional commercial loans require a personal guaranty from the sponsoring borrower. Lenders generally look for personal net worth at or above the loan amount, though this varies. The guaranty structure determines the recourse classification: full recourse holds the borrower personally liable for the entire debt; partial recourse limits that exposure to defined conditions; non-recourse removes personal liability entirely, with the property itself serving as the sole collateral. Non-recourse structures are less common in conventional lending and typically reserved for strong institutional sponsors or stabilized assets.

Conventional loans offer real advantages in speed, flexibility, and accessibility — but borrowers should weigh several factors:

Personal exposure: Full and partial-recourse structures leave sponsors personally on the hook if a loan defaults. This is a meaningful distinction from non-recourse CMBS or agency debt.
Credit and liquidity requirements: Lenders rely on the personal guaranty, which means borrower financials are scrutinized alongside the property itself. Weak personal balance sheets can disqualify an otherwise strong deal.
Rate period length: Fixed-rate periods on conventional loans tend to be shorter than what CMBS products offer, meaning rate risk re-emerges sooner — an important planning consideration on longer-hold assets.
No federal oversight: While this enables flexibility, it also means there is no standardized benchmark for terms across lenders. The Montfort Lending Group provides a large variety of choices for its clients through providing access to thousands of different lenders in one portal.

A Note on DSCR and Debt Yield

Two underwriting metrics drive conventional commercial loan sizing more than any others. The Debt Service Coverage Ratio (DSCR) — minimum 1.20x — measures how much cushion a property’s net operating income provides above its debt service obligations. A 1.20x DSCR means for every dollar of debt payment, the property generates $1.20 in NOI. The debt yield — minimum 7–8% — divides NOI by the loan amount and gives lenders a rate-independent measure of credit risk. Both metrics must be satisfied simultaneously, and it is typically the more restrictive of the two that determines the maximum loan amount a given property will support.