No lender wants to make a loan that will ultimately go into default. While most of their funds may eventually be repaid, banks understand that collecting bad debt can be an expensive and lengthy process.
As an HOA that needs to borrow money, your association should strive to put its best foot forward when looking for a loan provider. You may not have a second chance to make a good first impression with a lender. So, how do you make your association look attractive as a borrower?
Put yourself in the bank’s shoes. First and foremost, lenders want to see a clear path to repayment. Before raising your hand for a loan, it is a best practice to lay out how the assessment will be handled. Are you going to raise monthly or quarterly dues? If so by how much? How much of an increase is this and can your association afford it? If you are an HOA board member, you may want to download this HOA board member guide.
You may want to address delinquencies before raising your hand for a loan. Have you obtained buy-in and support from the community as well? No lender wants to do a lot of work towards underwriting a loan only to find out that few residents knew about the request or support the initiative.
Presenting your HOA in the best possible light may mean that a bit of legwork needs to be done before the application is filled out. Given the size and importance of these types of transactions, many boards are simply more comfortable outsourcing the process to an expert. They want an advocate who will help prepare a professional and complete loan package. When lenders are given a well-presented loan package, they understand that they need to be competitive. They see that the requests for proposal are serious, well thought out and complete.
When a lender is presented with a properly structured request for proposal (RFP), they see that this will not be a fait accompli loan. They understand that they will have to sharpen their pencils on price and structure.
Arch Capital Solutions acts as an advocate for your HOA. We have relationships with lenders who specialize in HOA loans.
In many states, the board may actually have a fiduciary duty to make financial decisions that are in the best interest of their members. Arch Capital Solutions can satisfy those fiduciary duties acting as the HOA’s financial advisor. We help HOAs obtain financing and choose the best proposal from multiple lenders. Contact us at 1-239-304-6180 or [email protected]. Or visit us at https://archcapital.wpengine.com