Banks Deny Loans Often for HOAs

Some clients call us after their regular bank has denied them an HOA loan. They are flummoxed because they (mistakenly) believed that the bank would loan money to their association.  While most board members are familiar with the car, home, and/or business loans, few, if any, have first-hand experience with HOA loans.

By definition, all commercial banks accept deposits and make auto, home, and business loans. However, banks diverge when it comes to HOA or Condo Associations loans.  This is considered specialized lending, as some of our clients find out the hard way.

The Application Process Can Be Cumbersome For Home Owners Assosiations

One of our clients filled out 25 loan applications with various banks before contacting us. Her initial communication was positive with all 25 institutions. Each bank expressed interest and encouraged her to fill out their forms. But, after spending months providing documents and following-up, not a single bank committed to her loan request.

We examined the list of banks she approached and none of them were in our database of specialized lenders. In other words, we would not have approached any of the banks she spent several months pursuing. After restructuring her request, we approached 4 lenders, received 3 letters of intent, and 2 commitment letters.  She selected the loan that best fits her HOAs needs.

Even though we enjoy ongoing relationships with a large number of institutions that specialize in HOA lending, we often approach additional lenders too. Every opportunity is unique, and we are always looking to expand our lending relationships.

Finding the Right Bank Can Be Overwhelming For HOAs

While this all sounds simple, it’s not.  There’s much more than just a single letter or call with each potential lender.  In general, only about 10% of initial inquiries turn into firm loan commitments. And, for every loan commitment received, we have more than 10 conversations about the nature of the terms and the status of the HOA before we get the commitment.

For volunteer board members, this process can be overwhelming and burdensome.  As many of our clients have commented, we save HOAs a lot of time and frustration by doing much of the heavy lifting for them; and, by leveraging the relationships we know are likely to be fruitful in securing the loan an HOA may need.

Arch Capital Solutions acts as an advocate for your HOA. We have relationships with lenders throughout the country 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 its 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.