By Stacy Dyer, Senior Managing Director, Alliance Association Bank
Introduction to Alliance Association Bank
Alliance Association Bank is a specialized HOA banking division with over 15 years of experience serving the community association industry. Our expertise extends to various types of associations – including timeshares, homeowner associations, high-rise communities, townhome and condominium associations. Serving over 900 management companies and thousands of HOAs across the country, we are a trusted partner in providing banking services to the community association sector.
Deposit Type Products
When it comes to managing funds for your timeshare resort, it’s essential to have a well-thought-out plan. This begins with obtaining a reserve study and aligning your funding strategy with the maintenance and reserve expenditure needs. As you follow this plan, you may find yourself accumulating excess funds over time.
FDIC Insured Products – To safeguard your funds, especially in uncertain times, consider products that provide additional FDIC coverage such as ICS (Insured Cash Sweep) and CDARS through the IntraFi Network1. These products can provide your resort with up to $50 million in FDIC insurance coverage. It’s important to note that no entity or individual has ever lost deposits through the IntraFi program. You can easily work with your existing bank to access these products and enjoy FDIC insurance coverage. The interest rate you receive will be determined by the bank you are working with and the type of product you select.
Lending for Timeshare Resorts
Timeshare resorts often face underfunding for their reserve accounts, leading to an increasing demand for loans. Here are some key considerations when seeking a loan2 for your timeshare resort.
Choosing the Right Bank – Selecting a bank experienced in timeshare lending is crucial. Banks with expertise in community associations can better understand your unique needs and requirements. Commercial banks without this specialization may not fully grasp the nature of your loan request.
Collateral and Guarantees – Be prepared for the bank to evaluate collateral and guarantees. In many cases, banks may take the pledge of assessments as collateral, allowing them to assume control of the resort’s assessment collection if the association defaults on the loan.
Delinquencies and Inventory – Banks will assess the delinquency rate within your resort and also consider the inventory owned by the HOA. Your rental and resale programs will play a significant role in the bank’s decision-making process.
Reserve Study – Having a reserve study is crucial when seeking a loan. Some banks may even require you to obtain one within a certain timeframe after the loan is approved. Loan proceeds can be used to cover the cost of the reserve study.
Loan Term – While timeshare loans typically have shorter terms (often between five and seven years), some banks may offer longer-term options. Consider whether you want a revolving line of credit or a term loan, and discuss the possibility of early repayment without penalties.
Additional Funding Solutions
We understand that some associations face challenges in fully funding their reserves, especially when required by legislation. To address this, we are introducing a reserve funding product that allows associations to meet their reserve requirements while spreading the repayment over time. This relieves owners of the burden of large upfront assessments.
Planning Takeaways
Carefully managing your timeshare resort’s finances is crucial to ensure its long-term viability. By understanding your deposit and loan options, as well as the factors banks consider when approving loans, you can make informed decisions that benefit your association and its members. We recommend proactive financial planning, especially considering the potential for rising interest rates. Don’t hesitate to reach out to us for further information or assistance in securing your resort’s financial future.
For more information contact: Stacy Dyer, Senior Managing Director – East Region and Timeshare HOA. Phone 888-734-4567 | Mobile (843) 637-7181 | Email: SDyer@allianceassociationbank.com | allianceassociationbank.com | Alliance Association Bank is a division of Western Alliance Bank. Member FDIC.
1. Placement of funds through IntraFi Network Deposits is subject to the terms, conditions, and disclosures in the service agreements, including the Deposit Placement Agreement (“DPA”). Limits apply and customer eligibility criteria may apply. Program withdrawals may be limited to six per month for funds placed in MMDAs. Although funds are placed at destination banks in amounts that do not exceed the FDIC standard maximum deposit insurance amount (“SMDIA”), a depositor’s balances at the relationship institution that places the funds may exceed the SMDIA (e.g., before settlement for a deposit or after settlement for a withdrawal) or be ineligible for FDIC insurance (if the relationship institution is not a bank). As stated in the DPA, the depositor is responsible for making any necessary arrangements to protect such balances consistent with applicable law. If the depositor is subject to restrictions on placement of its funds, the depositor is responsible for determining whether its use of IntraFi Network Deposits satisfies those restrictions. ICS and CDARS are registered service marks of IntraFi Network LLC.
2. All offers of credit are subject to credit approval, satisfactory legal documentation, and regulatory compliance.