I freely admit to being unbelievably ignorant of financial matters. For purposes of answering, assume I am appallingly lacking in knowledge of anything. You can’t possibly offend me by explaining everything, using small words
Here the deal: I’m on the board of a non-profit (a very poor one - we are lucky to have $6 to 8k in the bank at any given time) and we’d like to purchase security cameras and monthly service from Vivent. But Vivent won’t sell to us unless someone opens a line of credit. I’ve been asked if I’d be willing to do this.
What would be the potential impact of doing so? My credit score is excellent (usually around 815 or so), so I imagine I’d be allowed to do it. And I would never actually use the credit. Even though we are very limited financially, the organization should be able to make the monthly payments to Vivent.
I don’t mind helping out by doing this, but I just wonder if there could be negative consequences I should be aware of. Thanks for any thoughts people have.
Who is “we”? Because as I see it, if you do this there is only “you”. So unless you are the one who actually controls and can spend the organization’s funds, I would politely decline.
Another thing to consider - who has the ability to incur costs or charges by Vivent? Does the organization have internal controls in place to prevent unauthorized charges?
Seems like a bad idea. You’re going to personally vouch for the company’s ability to pay back the loan. Furthermore, if this is a secured LOC (ie HELOC), you could lose your house.
Are the cameras so expensive that they can’t pay upfront/with a credit card or is the camera company requiring an open line of credit as a requirement of purchasing from them?
In either case, I’d decline. If your company can’t get it’s finances in order well enough for a small credit line, they may not be able to pay it back either. Similarly, if the camera company is requiring it…I’d be curious as to why.
First it depends on whether they report to any of the credit bureaus. If they do, it depends upon how much credit they give you. Even if you have a great score (you do) & low debt, if you were to open a bunch of new credit cards, along with a new HELOC, all of a sudden you have the potential to run up all of those new lines, which in & of itself will lower your credit score some. Each individual line of credit can ding you a few points, not much but possibly just enough if you’re looking to buy a new car or finance something else & prevent you from getting the best rate.
Second, is the non-profit not some sort of legal entity? Do they have a bank acct in their own name? If so, why can’t the non-profit open up the LoC? Also, do the non-profit have the funds to buy the cameras outright? If so, there shouldn’t need to be any reason to open a LoC; if Vivent demands one for a cash payment, I’d look elsewhere.
Finally, if you do open it in your name; how do you ensure the non-profit pays & pays on time? Do you personally have (sole) signing authority or does any check need two signatures? If anything happens, you are either out-of-pocket personally or would be dinged for being late. This could add fees, trigger a higher interest rate &/or lower your personal credit score if they report it to the credit bureau(s).
It should be a fairly trivial matter to get a credit account in the name of the organization with the organization liable for any charges incurred on it.
You mention the org having a bank account so the first thing I’s check into is whether that bank will issue a credit card.
I can’t speak as to the OPs specific non-profit but given recentevents around the world a house of worship fits the bill or a “Friends” organization (Friends of the library, community center, etc.)
It’s not our “highest” priority, but it is important becausee:
We’re in a rather seedy part of town. A few weeks ago our front porch was the site of an assault (not related to our activities). There is a county park across the street from us, and low-lifes do hang out there.
We had a break-in recently. Luckily, the guy was caught red-handed, but he almost managed to abscond with a lot of stuff.
We have over $50,000 worth of musical instruments on the premises.
We are open at night for use by others in the community (theatre and music groups that use our stage for rehearsals), when no staff are around.
We have a donation box, as well as a cashier’s box where proceeds from our museum gift shop sales are kept.