Clubs borrowing money from members?

[Joel_Stewart]

Has anyone heard of this?

A club I am familiar with is seeking to borrow $1 million for improvements.  The club has no debt but seeks a slightly more flexible schedule for paying back a loan then with a bank.  Most likely, they are willing to give free dues and some perks for members willing to loan them money.

[David_Tepper]

Joel -

Yes, I know of a club in the Bay Area where the members have funded a loan to their club.

DT 

[BCrosby]

The arrangement would give disproportionate power to the member/lenders. I'd guess that would be a problem for some.

Bob

[Tim Gavrich]

Isn't that essentially what some members of the Cliffs Communities did some years ago? Although in their case, they did it to kick Jim Anthony out of the loop, I believe.

[Joel_Stewart]

Joel -

Yes, I know of a club in the Bay Area where the members have funded a loan to their club.

DT 

Can you explain ?   I'm not looking for bailouts or buyouts.  Simply the club is looking for an alternative source of funds other than going to a bank.

[David_Tepper]

Joel -

Not sure there is much to explain. The club was looking to borrow a sum of money. A group of members was willing to lend it, likely at a rate less than a bank would charge and with no points/fee involved. A contract was drawn up to set the terms and secure the loan and the loan was funded.

DT   

[Carl Rogers]

Sounds like a great way to ruin what might well be a good relationship .... I would have one hell of a time explaining that idea to wife.

Why not invest in an Internet or Bio-tech start-up?

[Tommy Williamsen]

The resort where I live wanted to put in a bike terrain park and asked for "angel members" to give interest free loans. Within two years all loans were paid back. They did the same thing with improvements to the golf course with the same result. 

[Greg Gilson]

Pretty standard arrangement at the private (member "owned") clubs in Australia. It comes under a number of guises but , traditionally, has been called a debenture. Club needs $X for project (say clubhouse reno). Club goes to members asking (sometimes telling) them they want each member to lend the club a certain amount of money (say $1000). Club gives the member a debenture (piece of paper) and repays the member at $100/year...usually (not always)  zero interest.

There are lots of hybrid versions.

[Patrick_Mucci]

Has anyone heard of this?

Joel,

Yes, a club I'm very familiar with did this on a number of occasions.

Mostly for specific projects

A club I am familiar with is seeking to borrow $1 million for improvements.  The club has no debt but seeks a slightly more flexible schedule for paying back a loan then with a bank.  Most likely, they are willing to give free dues and some perks for members willing to loan them money.


"Free dues" and "perks" we're never part of the arrangement, nor should they be.

It was a simple financial arrangement between members who cared for the club, who were willing to invest in the club

[Sean_A]

My club funded its latest major expenditure using three sources.

1. Bank Loan.

2. Voluntary members loans paying ~5% interest.

3. Raised dues. 

Sean

[Mark Chaplin]

RCP borrowed a considerable sum from members for clubhouse refurbishment. If you lent £1000 repayable at cost after 20 years you receive a £50pa reduction in subs, for higher rate taxpayers it was equal to a 7% return on your loan. The club puts aside a sum each year for early repayments, to resigning or deceased member's estates.

The loans were totally voluntary but a very decent return for members. A win, win all around.

[Bill_McBride]

Has anyone heard of this?

Joel,

Yes, a club I'm very familiar with did this on a number of occasions.

Mostly for specific projects

A club I am familiar with is seeking to borrow $1 million for improvements.  The club has no debt but seeks a slightly more flexible schedule for paying back a loan then with a bank.  Most likely, they are willing to give free dues and some perks for members willing to loan them money.


"Free dues" and "perks" we're never part of the arrangement, nor should they be.

It was a simple financial arrangement between members who cared for the club, who were willing to invest in the club

We have done the same thing, in effect sold no interest bonds to willing members.  No perks. 

[Michael Graham]

Gullane GC in East Lothian at least partially funded their recent clubhouse renovation work thanks to a combination of 0% interest loans from members as well as some members gifting the club money.

Michael

[Jon Wiggett]

Seems a totally normal thing to me for some members to want to help the club out financially if needed. Lets face if it is a true members club then it belongs to the membership so they would be lending the money to themselves in essence. It certainly was always the norm here in the UK that any work done, would be done by members at cost and donating to the club was also a norm.

Anything else means the club has not a membership but a cliental.

Jon

[Matt MacIver]

We did a small amount, required by every Member, evidenced by contract, no interest, repayable at resignation, to construct the main dining room a few years after the first phase was finished and we had a full membership. Worked well.

[Dave Givnish]

When the improvements that are proposed are what is delivered, this should work fine. If these are course changes, get drawings and make sure that the architect and contractor do what they are supposed to do. The members should be prepared to pay off the loan in full through an assessment if there is a problem at some point in the process.

[Jeff Bergeron]

Any major work should require participation of all members. Borrowing from the members is fine but it is essential that everyone have ' skin in the game' from inception. ie a capital assessment. I recently left a club where the entire renovation was funded by member debt. The result has been a situation that could well destroy the Club. A less than satisfactory result, a divided membership and animosity sending many, including myself, heading for the hills. Sadly, what it will cost me to join a new club is way more than it would have cost my share of an assessment to fix the problems. Unfortunately, the  board cannot respond in a timely enough manner to make the wait worth my while.