When the Club was offered Deiter Horstmann's hangar it did not have sufficient funds to buy it from him so we looked at ways to borrow the money.  We spoke to the bank and they would lend the money if two of the Management Committee went guarantors and used their houses as security. 

No one on the Committee was willing to do this so I saw an accountant who suggested we raise the money from our members by way of loans.  He discussed issuing debentures ie members buy a note which promised full payment at a given date.  Again the Management Committee would be personally liable if the Club did not have the money.  He also suggested the Trust structure which he felt was more flexible and did not require the personal guarantees of Committee members, only ongoing and prudent management.

A number of members loaned their money to the club.  Some of the others had time limits on their loans and a few did not.  So when the time limits came up we had to find new lenders to replace the old and we did.  We also overborrowed from members to ensure that when loans were requested to be repaid we did not have to make the person wait for any great length of time whist we searched for a replacement lender.  We still had to look for more lenders.

 When we bought the second hangar, the Club borrowed more money and still kept a surplus of unused money in the bank.  When one member who had loaned a large sum asked for his money back we used some of our surplus and we got more lenders to keep our surplus up, and so he did not have to wait for very long even though it was a large amount.  Money from hangar income was also used to top up the surplus.

 When we bought the Grob we got more lenders and kept a small surplus.  When one member left after damaging an aircraft and demanded his money back within a very short time, he was fully repaid but the surplus was reduced and his loan was never replaced.  We still are not seeking new lenders which is a must for the loan system to work.

 We should be actively chasing up new lenders to replace the old and always have an excess of lenders so we can maintain a surplus of $20,000-$50,000 in the bank.  Then when any other lender wants some or all of our loan repaid, the Club can do so even if in part from these surplus funds. 

Again the surplus must be topped up by new lenders. 

Since purchasing the Grob most of the hangar income has been consumed by the Club and the surplus has not been topped up.  It is too low (only $3,000) but to top it up with new lenders is very difficult now.  The Grob does not fly and there has been a fair bit of negative comment about the Clubs finances and a reluctance to seek new ways of getting income.

This system works if the goal is that the surplus is owned by the Club and there are no lenders.

Cheers

John