Eichenblatt believes that traditional financial institutions won't start offering non-recourse repayment options in the near future partly due to regulation as non-recourse repayment options are currently not recognized as a part of the approved lending policies by the FDIC and OCC.

“The other factor is that this is an industry that can be slow to innovate, especially in how loans are processed,” says Eichenblatt. “While most CRE lenders do accept co-guarantors or substitute guarantors—basically other individuals offering up their own balance sheets—this is at best an imperfect and highly inefficient system,” he says. There are significantly higher costs for everyone—often with points in, points out and a piece of the deal, he notes. “It also doesn't increase the probability of collection or help avoid the frustration, the sunk time and costs associated with it.”

Banks and credit unions recognize the need to adapt to keep pace with today's changing market, and they've done so in almost every other area of banking. Until now, however, they haven't had an alternative to the personal guarantee requirements when it comes to CRE lending, Eichenblatt says.

He went on to say that, in his opinion, today's banks and credit unions should update their methods to compete before more of these non-banks and alternative lenders take their market share.

“What's more, it took these new players only a few years to go from basically a non-factor to a significant threat, so financial institutions need to act now, or risk getting left behind.”

The study was conducted online by The Harris Poll.