Smart Borrowing: HOA Loans Can Help Community Associations Tackle Large Expenses

April 16, 2024

To successfully serve their members, community associations are often called on to make wise decisions about money. It’s a big job. When large and unexpected expenses — from launching a capital improvement project to replacing a damaged clubhouse roof — inevitably come up, they may leave association board of directors weighing their options for covering costs while remaining solvent. 

Gaining a deep understanding of the available financing routes can help HOAs stay on the path to success in the short term and for the long run.  

Finding Funding

Using cash reserves is one option for funding needed projects in a community or development. But association boards often find that this choice can limit the organization’s ability to maintain services and meet financial obligations at the same time. On the other hand, depending on the size of the project, a one-time special assessment may be too burdensome for owners to absorb. 

In situations like these, reaching out to a bank that specializes in HOA loans can be a viable choice. Responsible borrowing delivers the flexibility to distribute the cost of large-scale projects over time — and divide it evenly among owners — in ways that suit the association. 

Is a Loan Right for Your Community Association?

The first step in exploring an HOA loan is to gain clarity on the costs of the project to be funded. Understanding your state of liquidity can establish an initial benchmark to use when you approach a bank with a loan request. 

Your association’s board and attorney will likely want to review governing documents to determine the association’s capacity to enter into a loan agreement. Those documents can also provide guidelines on permissible loan amounts and term length. 

At this point, it’s also smart to explore options for repaying a loan. These could include an increase to regular assessments or a special assessment paid over time. While it’s not necessary to nail down the repayment plan before beginning a discussion with a lender, having an initial direction for repayment can help manage owner expectations later and demonstrate the community’s commitment to repay the loan.

Beginning the Conversation

For a community association that’s considering large-scale costs, having a specialized lender on your side is a practical and forward-thinking solution. Alliance Association Bank’s team of trusted advisors has decades of experience handling loans for deferred maintenance projects, common-area improvements, construction defect repair, insurance premium financing and refinancing of existing loans. 

Our relationship managers take the time to get to know you and explore all association lending options — including term loans and various lines of credit, such as those that help handle construction and disaster recovery.  

Our team can deliver agile lending options with an expedited underwriting and approval process, all designed to meet your association’s business goals and commitments to owners. To learn more, contact your Alliance Association Bank relationship manager or find out more about what our bank can offer associations like yours. 

About Us

Alliance Association Bank

Alliance Association Bank, a division of Western Alliance Bank, Member FDIC, delivers a tailored suite of deposit, financing and technology solutions designed for community management companies and homeowner associations nationwide. The bank’s relationship officers provide a broad spectrum of innovative and customized solutions to help community associations succeed, all with a high level of expertise and responsiveness. Alliance Association Bank is part of Western Alliance Bancorporation, which has more than $70 billion in assets. Major accolades include being ranked as a top U.S. bank in 2023 by American Banker and Bank Director. With significant national capabilities, Alliance Association Bank delivers the reach, resources and deep industry knowledge that make a difference for customers.