An HOA loan is a loan made directly to the association—not individuals—that can provide financing for projects and capital improvements within the community. The association is responsible for the repayment of the loan through the assessments collected from the owners of the community. Projects can include pools, playgrounds, common areas, siding replacement, roof repairs or replacement, windows, asphalt, balconies and more

• Emergency repairs and maintenance: One of the primary reasons associations opt for HOA loans is to address unexpected expenses, such as emergency repairs or essential maintenance projects. These loans provide quick access to funds, allowing associations to promptly tackle issues and maintain the community’s overall value.
• Capital improvement projects: HOAs often undertake capital improvement projects to enhance the community’s amenities and infrastructure. Whether it’s renovating a clubhouse, updating landscaping, or installing new community features, an HOA loan can provide the necessary funds to realize these enhancements.
• Cash flow management: Associations typically collect dues from homeowners on a regular basis, but there may be instances where cash flow is insufficient to cover immediate expenses. HOA loans act as a financial buffer, ensuring that associations can continue operations smoothly without burdening homeowners with sudden increases in dues.

When there’s a significant capital need, an HOA loan can be a smart and prudent funding option. Upon approval, financing can happen quickly, so your project can get started fast. And because the loan can be paid back over time, typically residents could only see modest increases to their monthly HOA payments instead of a large special assessment that’s due up front to cover project costs.

HOA loans are an easy way to provide financing to homeowners in the community. Securing a loan could eliminate the need for the association to deplete their reserves or operating cash.

An HOA loan provides several advantages to your community;

An HOA loan allows a project to start and be completed at one time rather than going through phases. Once the loan is closed, funds can be available in as fast as 24 hours.

An HOA loan provides an association an option for financing costs over time, rather than requiring a lump-sum payment from owners up front.

An HOA loan protects reserves by allowing you to continue to contribute to your reserves.

It spreads out the cost of common area improvements to homeowners over time and assigns the cost of those improvements to the people who are benefitting from them the most. It also allows repairs and maintenance to be performed quickly, at today’s prices.

In some cases, HOAs, CIDs and PUDs may need to increase homeowners’ monthly assessment fees to make the loan payments.

Terms vary based on the type of loan—typically from 5 to 15 years.

When a Homeowners Association (HOA) takes out a loan, the collateral typically includes the HOA’s assessments and lien rights on the community. This means that if the HOA defaults on the loan, the lender can collect the owed assessments directly from the homeowners.

In some cases, the HOA might also pledge a certificate of deposit or money market funds as collateral. However, personal guarantees from individuals or homeowners are usually not required.

A number of factors are reviewed during the approval process for an HOA loan. It’s important to understand your association’s governing documents and state laws. In some cases, a vote or amended declaration may be required. Working with your association’s attorney at the start of the loan process can save time. Ensure the association’s financials are up to date by working with your property manager or accounting firm.

If you’re considering a loan, working with a bank that has experience in community association banking and lending can be especially beneficial. The bank’s experts will 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 forward.