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Advice and Resources for Private Club Management and Board Members

Thoughts on Debt Capacity for a Private Club

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Is Your Private Club Taking On To Much Debt?

As we meet with clubs considering obtaining or refinancing debt, we’re consistently seeing some troubling themes.  Many clubs take on too much debt, with repayment terms that are too long, without considering all of the club’s capital expenditure needs over the debt term.  Clubs also understate their funded debt burden when they do not include capital leases and draws under lines of credit in addition to structured bank loans. On top of this are membership bonds, refundable membership certificates and unfunded liabilities – often in the form of unfunded pension liabilities. They all need payment planning.  There are clubs that fail to develop a long-term strategy to fund a complete plan addressing all its capital needs while focusing on the sizzle of a project.  The results can be devastating and limit the maneuverability of clubs in rapidly evolving markets.

Long Days and Short Years

A popular notion is members will pay up to 20% more than they are currently paying in dues and/or capital fees for a compelling upgrade to their club’s campus.  That may be true.  However, some clubs take that to an extreme and take on debt that amortizes a very large amount over a 15 to 30-year period to keep the payments down while ignoring deferred and on-going CAPEX requirements.  That’s much too long when considering clubs generally take on major projects and upgrades every 7-10 years on top of significant ongoing annual capital needs.  Very long amortization periods will greatly limit the options available to the club and future administrations. Loans with balloon payments are even more problematic for many reasons and may come due at an inopportune time for the club. Refinancing a club’s debt can have much the same effect. As one savvy GM recently commented, club management is characterized by long days and short years.  When it comes to capital planning, he’s right on.  In the club world, 5 and 10-year planning horizons pass in the blink of an eye.

What Is The Right Amount of Debt?

When we are asked about the right amount of funded debt (bank debt and capital leases) and the proper term, we generally start with total debt not exceeding total annual dues and repayment terms no longer than 7-10 years for clubs with a stable membership base and a funded Long Term Financial Plan.  That amount can increase for any debt that is specifically funded through membership assessments. There’s a lot of analysis and math behind our starting points that we share with our clients as we fine-tune recommendations for them.  It is easy for Boards and members to get caught up in fancy plans without fully understanding the math behind a long-term plan.  That’s to be avoided.

Long-Term Financial Planning

We are happy to discuss long-term financial planning and the effective use of debt with clubs that are serious about their strategic planning.  As we wrote in a recent blog, we’re seeing too many strategic planning efforts stall out when it comes to answering, “how are we going to pay for this along with everything else?” Others press forward with funding plans that fail to address all the needs of the club and set the stage for a major shortfall a few years down the road.  Neither of these outcomes optimizes the value of strategic planning.  Some efforts can leave the club in a worse position.

We help clubs develop fully funded long-term financial plans and navigate the effective use of debt.  We help clubs plan for a sustainable future.  For further information please reach out to Joe Abely at jabely@cbpros.com or 781-953-9333, or Dave Duval at dduval@cbpros.com or 617-519-6281. There is more information available on our website at www.cbpros.com.


Club Board Professionals is a strategic financial consulting and training firm.  The Principals, Dave Duval and Joe Abely, assist clubs achieve excellence in three areas: governance, financial sustainability and membership satisfaction. Contact us for a complimentary initial assessment of your club.