In the outlier scenario you describe, your only choices may be a 2% LoC draw or a 2% bribe. However, in my humble opinion, if a co-op has so little money in it's reserve accounts that they are forced to use their line of credit to initially cover an unanticipated expense, then the co-op has far greater fiscal issues than whether or not to offer shareholders an inducement to advance the money.

They way this is *supposed* to work is a co-op maintains a minimum of about three month's worth of maintenance income in their reserve account. If the co-op get hit with an unanticipated expense, the reserve funds are used to cover the expense. Then, the board imposes an assessment to replenish the reserve account in an orderly manner. The LoC is untouched and there are no unnecessary interest payments.

The reason it's *supposed* to work this way is to avoid the exact scenario described here. Whether the LoC has a 2% interest rate or the co-op offers a 2% prepayment discount, the co-op is still short 2%. With the LoC, all shareholders equally share the pain resulting from poor fiscal management. With the prepayment discount, the class of shareholders who can afford to prepay the assessment reap the advantages while the class of shareholders who can't afford to prepay are penalized.

This scenario is akin to a firefighter trying to put out a blaze before the hose is connected to the hydrant. If the fire truck doesn't carry some emergency water, nothing's going to initially come out of the nozzle. If the co-op doesn't have any reserve funds, they'll be forced to borrow money to cover their emergency, either from the LoC or from shareholder largess. Either way, they'll be paying more than they have to.