By April Ahrendsen, CIT Bank
Does your community association need to fund a big project? Whether it’s tackling deferred maintenance, making emergency repairs, or upgrading landscaping, you have options to cover the costs – and financing may be the right choice.
Three Options for Big-Ticket Projects
- Reserve funds can be a good choice if they’re available and the project meets the community criteria.
- Special assessments can be used to raise funds without permanently increasing assessments to cover a specific project within a particular timeline.
- Financing can be a smart option when reserve funds are unavailable, the project does not meet the criteria for using such funds, or special assessments place financial difficulties on your homeowners.
Three Tips for Seeking a Community Association Loan
Get your papers in order. Banks are highly regulated institutions, so they’ll need to examine your documents carefully.
- Make sure the community documents are complete and current. It can be extremely difficult to underwrite a loan if they aren't.
- Know what the association can and cannot do. If, for example, the bylaws require approval by association members before the board seeks a loan, be sure to have that approval in hand.
- Consult with your legal counsel to resolve any ambiguity before you begin your application.
Be specific about your HOA project’s scope and cost. Banks that specialize in HOA lending to community associations often provide project-specific financing. It may be for façade work, new roofing, drain systems – almost anything – but remember:
- An itemized budget is key.
- The bigger the project, the more complicated the variables will be.
- You may want to hire an experienced construction manager to define the project specs, evaluate contractor bids and prepare a detailed budget presentation as an extra cost in the short run could be more than offset by savings later.
Work with an experienced community association lender. A financial provider that understands community association banking can offer:
- Products that streamline the HOA lending process
- Creative solutions for difficult situations
- Flexible loan structures, competitive rates, and expedited loan processes
Working with a financial provider with experience in community association lending can be especially beneficial. The bank’s experts can help you through the loan process – even attend your board and membership meetings – and assist you with gaining the necessary approvals you need to move your projects forward.
- Get your papers in order. Banks are highly regulated institutions, so they’ll need to examine your documents carefully.
- Make sure the community documents are complete and current. It can be extremely difficult to underwrite a loan if they aren't.
- Know what the association can and cannot do. If, for example, the bylaws require approval by association members before the board seeks a loan, be sure to have that approval in hand.
- Consult with your legal counsel to resolve any ambiguity before you begin your application.
- Be specific about your HOA project’s scope and cost. Banks that specialize in HOA lending to community associations often provide project-specific financing. It may be for façade work, new roofing, drain systems – almost anything – but remember:
- An itemized budget is key.
- The bigger the project, the more complicated the variables will be.
- You may want to hire an experienced construction manager to define the project specs, evaluate contractor bids and prepare a detailed budget presentation as an extra cost in the short run could be more than offset by savings later.
- Work with an experienced community association lender. A financial provider that understands community association banking can offer:
- Products that streamline the HOA lending process
- Creative solutions for difficult situations
- Flexible loan structures, competitive rates, and expedited loan processes
Working with a financial provider with experience in community association lending can be especially beneficial. The bank’s experts can help you through the loan process – even attend your board and membership meetings – and assist you with gaining the necessary approvals you need to move your projects forward.
The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of CIT, a division of First Citizens Bank. For any matters concerning your specific needs and objectives, you should seek the professional advice of your own independent legal counsel, insurance advisors or other consultants.
