California Corporations Code §7210 provides that a corporation shall have a board of directors who shall manage and exercise all corporate powers on behalf of the corporate entity. Additionally, Corporations Code §7140 provides that, subject to any limitations contained in its articles or bylaws, a corporation shall have the power to:

“(i) Assume obligations, enter into contracts, including contracts of guarantee or suretyship, incur liabilities, borrow or lend money or otherwise use its credit, and secure any of its obligations, contracts or liabilities by mortgage, pledge or other encumbrance of all or any part of its property and income.” [Emphasis added.]

However, many association governing documents impose limitations upon a board of director’s ability to borrow money or incur indebtedness without the approval of the membership. Accordingly, an association should review its governing documents prior to executing any loan documents.