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A letter of credit facilitates spending money quickly, by essentially pre-qualifying for a loan or other monetary assets in another's name.

The letter of credit assumes that the person or organization is financially stable enough to qualify for the 'borrowed' amount.

A condominium association spends assessment dollars on budgeted expenses. The assessments and the budget are usually revised annually.

If the association's board needs to spend money quickly, it would only be in a special, predetermined situation. Usually, extraordinary expenditures require a board vote, a membership meeting open for discussion, and approval before monies are spent.

A letter of credit doesn't make too much sense for a condominium association, given the alternatives, such as special assessments or documented borrowing against reserves (with a specific repayment plan).

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Q: Is it a good idea for a condominium to seek a letter of credit?
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