Question: Interest-free loan in exchange for control of fundraising?
We don’t have a playground. A parent wants one now and is willing to lend us the money interest-free ($60,000). The catch is, he wants control of all fundraising aspects for the playground. The plan is for us to cut him a check as we get the money until the loan is paid off. I am getting the “selling my soul” feeling, but I’d like to get the playground up sooner rather than later. I think this parent plans to hit up families for donations, but I think he’s unrealistic about how successful it will be. We have fundraisers in place for the playground, but it’s slow going—$1,000 to $6,000 at a time. I will seek out an attorney to set up a contract, but I’d like to know whether you’ve ever experienced something like this.
Advice from PTO TodayElly writes:
Of course, the problem with a loan is that you have to pay it back. Would you take a bank loan to pay for your playground? If so, the bank would want to know, in detail, how you would repay the loan. If you couldn’t develop a reasonable plan, you wouldn’t get the bank loan, and you shouldn’t take this one, either.
A middle ground would be to hold off on taking the loan until you raise a certain percentage of the money, say a third or half. The idea is to get to the point where you feel confident that over a specific period of time, you’ll be able to raise the rest.
Some parent groups set up a separate organization to handle major fundraising projects. This approach has the advantage of making it clear that if you donate to Our School Playground Fund, your money goes to the playground project. And if you donate to the PTO, your money goes to all of the other important things the parent group does.
That might work for you, with your beneficiary donating his money to this new organization rather than committing the parent group to a major financial liability.
If you do turn over the fundraising duties to this gentleman, you’ll need to nail down some details. Either in the charter of the new organization or in a loan contract, spell out the number and perhaps the types of fundraisers that can be run each year for the project. While the playground is important to you, it’s probably not the most important thing your group does. You wouldn’t want fundraising for this project to derail the efforts to raise money for everything else.
Finally, be sure to talk in detail with a lawyer. And absolutely don’t commit to a contract unless your group feels completely comfortable with it. If you don’t take the loan, the consequence is you’ll have to wait a little longer for a playground. If you do take it and things go wrong, the consequences could be a lot worse.
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