The HOALendingPro Talks About Borrowing
There comes a time when most communities simply run out of money before they run out of projects to complete. Or when an opportunity to purchase some neighboring land appears and the association just doesn’t have enough to pay for it. Or when a builder vacates a job leaving a community with a construction defect and no apparent way to pay for it. All is not lost. Take a deep breath and let’s talk about HOA lending and how the HOA Lending Pro can help you.
In the past two decades, I have seen communities large and small successfully realize their financial goals by borrowing money from an outside institution. While it is a relatively simple and straightforward process, it is not the kind of transaction that your friendly neighborhood bank is usually familiar with. Traditional loans are made to people or businesses, neither of which describes an organization whose sole purpose is to protect, maintain, and enhance commonly owned assets of a home owners association. From the viewpoint of the bank, lending to an HOA is more like lending to a municipality. And just like lending to a municipality, a lender wants to be assured the citizens of the municipality have the ability to collectively repay the loan.
Negotiating with a lender can be a tricky business. This HOA Lending Pro has seen it all over the years. I have seen HOAs with great looking business plans, well-kept minutes from their Board meetings, and solid financial records that would indicate they would be a great candidate for a loan. I have seen poorly laid out plans, accompanied by scraps of paper presented as records, and bank accounts that include bounced checks from associations that just couldn’t be helped. And I’ve seen everything in between, which is where most HOAs exist.
Perhaps the most important thing an HOA can do BEFORE applying for a loan is to take a good look at how much money will be needed and how likely the association is to be able to pay back the loan. There may also be considerations with the community’s governance and its ability to borrow money on behalf of the association. The bottom line is that a well-prepared loan application is often a harbinger of how successful the community will be in attaining the loan.
As the HOA Lending Pro, I can help your community prepare to borrow money or establish a line of credit. Contact me, Alan@HOALendingPro.com, and tell me your story. I may have helped lend more than a billion dollars to HOAs across the country but your HOA is the one I am most interested in helping now. Together, we will succeed.