Membership Loan

by Marie
(Arkansas)

We have allowed members to borrow money from the church without interest. They pay the loan back.

I wanted to know if this is legal? When they pay the loan back how should I account for the loan?

I show as a debit as a loan and credit it as an reimbursement in income account.

Comments for Membership Loan

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Jan 19, 2020
 Loans can create risks to the church
by: Vickey

Some states do not allow nonprofit organizations to loan money to employees or members of the organization. In those states it could possibly be a criminal offense. Check your state laws.

See more on that is one of my previous replies:

https://www.freechurchaccounting.com/loan-from-general-fund-to-pastor.html

Frank Sommerville explains what additional risks a church could face with loaning church members money in this reply to this question: No-Interest Loans...

https://www.churchlawandtax.com/web/2010/february/no-interest-loans.html

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