Loans to fund non-profit organizations – use your self-directed IRA creatively and discreetly

2019-05-15 Business No comment

Private schools, churches and other non-profit entities, regardless of focus or belief, often have difficulty borrowing for construction projects. Adding classrooms, laboratories, new minarets, adding extra capacity to existing facilities, and even renovating existing space requires money. The use of construction funds has long been a method of fundraising and requires a lot of long-term planning and uncertainty of consistent outcomes.

There is another way.

Ask members to borrow money from their IRA and other tax incentives! Self-directed programs can provide funding and benefit organizations and IRA holders. Using an IRA loan from a self-directed IRA administrator allows individuals to choose their own investment, one of which can be a loan to the organization. For example, these loans can be:

  • In the form of an annotation
  • Can be guaranteed by the property of the organization
  • Will represent an investment in IRA and must reflect a reasonable rate of return.
  • Transfer the interest benefits of principal and expenses to an IRA account instead of an external lender.

Consider these examples:

youth Center

The downtown church decided to add a youth social center to the existing space currently used for storage. The 1,000 square foot area requires new floors, paint, drywall partitions and bathrooms. In addition, furniture and equipment for Friday night movies and pool tables will be purchased. The cost of the project is estimated to be approximately $50,000. Youth groups will charge for the purchase of movies and food at that location.

Raising funds by creating a $50,000 bill will pay 5.5% interest per year. The note will be amortized over a five-year timeframe and investors will become church members' individual retirement accounts. Let's assume that there are five people out, each of whom uses a self-managed administrator to borrow $10,000 from their IRA account, which is responsible for maintaining the tax deferral status of the IRA account. The principal and interest are returned to the IRA account. IRA holders have already made a return on investment, which is both safe and feels good.


A small private school wants a school gathering and theatre production venue. As the board decided to focus on the art of the course, it is expected that this new facility will increase enrollment. They have room to expand existing properties and engage with local banks to provide $500,000 for this increase. The bank is interested in the project, which is based on the reputation of the school and the predictability of annual tuition paid by students, but is reluctant to provide 100% of the funds.

The school trustee decided to distribute “bonds” to interested parents and alumni through bank loans of $250,000. They built the problem in increments of $50,000, which will be provided along with the construction. The interest rate offered will be based on a certain difference in the T-Bill rate at the time of bond issuance. This allows them to borrow money only when needed, thereby controlling costs and allowing them to offer investors current competitive rates.

Today, many people want their investments to reflect their personal or political values ​​in some way. What better way to invest, not just "What do you know," but what you believe.

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