Alliance Association Bank advises timeshare resorts to explore alternative funding sources

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Borrowing can provide an option to survive the pandemic

Only a select number of banks offer emergency lines of credit for disaster-related purposes.

As the current conditions take a toll on the budgets of timeshare resorts, many properties are seeking alternative sources of funding to raise cash and fund operations.

Some resort owners’ associations are dipping into their reserve funds to pay operating expenses, but Stacy Dyer, senior managing director of Alliance Association Bank, says borrowing from external sources may be a better idea for many associations. She listed four reasons why:

  • Necessity. Borrowing avoids depleting the reserves. Also, the reserves may be insufficient to meet the needs, and owners may lack the financial flexibility to cope with a special assessment.
  • Flexibility. Keeping the reserves available now can help prevent the need to special-assess for a future emergency.
  • Time. Spreading the cost of a loan over a period of time can help owners avoid a large one-time special assessment.

If your association does decide to borrow, what you plan to do with the money will help to determine your chances of receiving a loan. Banks look with the most favor on capital-improvement projects, Dyer says, and some banks will provide financing for construction-defect repairs and related legal fees. Only a select number of banks offer emergency lines of credit for disaster-related purposes. Many banks will not provide financing for a shortfall in operating income.

In previous years, annual reporting and even audits of an association’s books would generally be required. Now banks may require quarterly or even monthly financial reporting. Also, depending on the size of the loan and the age of the last reserve study, a bank may require an update or a complete new reserve study as part of the application process.

The Lending Process

Once you determine that your association may need a loan, Dyer advises, review the governing documents and get your attorney involved, make sure the association has the ability to borrow funds, and determine which board members would be authorized to sign the loan documents. Then, the resort’s property manager or management company should reach out to several banks familiar with association lending. Alliance Association Bank can help with that process, Dyer says.

Alliance Association is a division of Western Alliance Bank, Member FDIC. Western Alliance is one of the country’s top-performing banking companies and has ranked in the top 10 on the Forbes “Best Banks in America” list for five consecutive years, 2016-2020. For more information, contact Stacy Dyer at (843) 637-7181 or sdyer@allianceassociationbank.com.

*All offers of credits are subject to approval.

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Stacy Dyer
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