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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Join in and write your own page! It's easy to do. How? Simply click here to return to Church Accounting FAQs.

If you want to DIY your payroll, I highly recommend you look at using Gusto! It is very user friendly and their support is awesome! Plus they know how to set up and maintain payrolls for churches and nonprofit organizations.

Note: I am a "partner" of Gusto, but as I have told you before ... I never recommend anything that we or our clients have not tried and love =)

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