All is not lost. There are commercial lenders that understand the special needs of community associations. The trick is to find them and present your loan request properly. Typically, loans to homeowner associations are made for repairs and renovations to common area components. However, some lenders understand that using the proven assessment fee cash flow can be a reliable source of repayment and an acceptable risk.
Lenders also look closely at the historical financial information presented in the loan application.
Many lenders require detailed monthly financial statements and an audited annual statement to evaluate the loan request. The annual tax returns are also helpful in verifying assessment income. Once the association's cash requirements are understood by the lender, a financial projection can be made to assess the impact of a new loan on that cash flow. Amortization periods can range from three to ten years, depending on the strength of cash flow and overall stability of the association and management. Last three year tax returns For construction loans, a copy of construction contract, plans, permits, architect's contract, builder's risk insurance, bonding and liability insurance, etc.