What is the difference between a completion guaranty and a carry guaranty on a CRE construction loan?

Two distinct guaranties covering two distinct phases of risk

Construction loans split sponsor recourse exposure into two phases. The completion guaranty protects the lender during the construction phase, from groundbreaking through certificate of occupancy and lien-free completion. The carry guaranty protects the lender during the stabilization phase, from substantial completion through stabilized DSCR.

The completion guaranty is typically a full-recourse obligation: the sponsor signs personally (or via a key principal) and is on the hook for any combination of hard-cost overrun, soft-cost overrun, and schedule slippage that delays substantial completion. Burn-off triggers: certificate of occupancy issued, lien-free completion certificate delivered by the architect, all final waivers received, and final loan-budget reconciliation.

The carry guaranty covers the operating period between substantial completion and stabilization. The standard structure: sponsor funds debt service and operating shortfalls each month until trailing-three-month DSCR hits the burn-off threshold (commonly 1.20x or 1.25x) for 3-6 consecutive months. Some structures add a debt-yield backstop (e.g., 8% trailing) to prevent burn-off on a deal that hits DSCR via aggressive expense underwriting.

Sizing the burn-off thresholds is one of the most-negotiated terms. Sponsor-friendly negotiations push the DSCR threshold to 1.20x and the maintenance period to 3 months; lender-friendly versions push to 1.30x and 6 months. The negotiation is highly value-additive: every six months of carry exposure can mean six months of additional sponsor capital at risk.