Church    Financing       Center

Due to the nature of a church loan, there are a number of obstacles that can often make financing a church construction project very difficult. This is particularly true when dealing with a lender that does not have a lot of experience with or does not specialize in church loans. Here are six great tips from a commercial financing group about improving your church lending process when borrowing from a lender who does not typically provide church financing. To read the entire article, click here.

1) Church Loan Financing Approach Number One: Non-Resource Church Loans (replacing individual guarantors). The willingness to eliminate individual guarantors is likely to require a non-traditional church lender. With this church financing approach, church lending will not depend on individual guarantors.

2) Church Loan Strategy Number Two: Long-term church loans up to 30 years. Church loan financing will be more successful when it is not short-term (much lower monthly payments are likely).

3) Church Loan Strategy Number Three: Lower interest rates. Churches have frequently been taken advantage of and have paid higher interest rates than necessary.

With payments limited to prime plus 1% or less, church financing payments will be noticeably reduced. Together with a longer-term church loan, the overall payment decrease will improve church cash flow.

4) Church Loan Strategy Number Four: Minimum church financing set at $500,000. This encourages churches to finish most business financing in one stage.

5) Church Loan Financing Approach Number Five: Higher LTV (75%-85% is possible). This produces a realistic amount of 15% or so (compared to 50% scenarios with much church financing) for the non-financed portion in refinancing or purchase down payment.

6) Church Financing Solution Number Six: Church loans can now include new construction, renovation, land acquisition, purchase and refinancing. Because of more flexible church loans, it is no longer necessary for these vital church financing needs to be postponed indefinitely.

A church loan is not the only option for churches seeking funding for construction or improvement projects. Church bonds are similar to church loans because they help finance church building projects. The difference is that while a conventional church loan comes from one lender, a church bond comes from multiple lenders who buy the bond offering.

For most churches, however, bond are probably not the best financial decision, as there are many more costs associated with obtaining financing in this way. These include much higher closing costs and a higher effective interest rate. It is important for the church to weigh the options carefully, as for some churches that are not in a hurry to pay off the bonds early, a church bond may be a better fit as opposed to a loan.

Click here for more information about church bonds.

Here’s a link to great blog written by an individual who has worked in the church financing market for 10 years. He has some insight about things that churches can do to help themselves get the financing they need. I think it’s great to get the perspective of an experienced person who is involved in the process first hand.

Click here to read the blog.

A recent trend in the church financing market is the growing availability of financing options for a variety of projects; a trend commonly found in the residential mortgage market. While churches may find this as good news since they will not have trouble obtaining funding for any upcoming projects, it can often be a slippery slope in which the church will find itself borrowing more than it is able to repay.

Just because lenders are offering special features with their church loans (such as no money down, etc.), doesn’t mean it is always in the best interest of the church to accept such features. While it is certainly beneficial in the beginning, allowing the church to obtain needed capital, if the loan is accepted for too great an amount on too easy of terms, then much like a residential home buyer, the church can find itself unable to make the loan payments later on.

The lesson here is, that while it is great that the church financing market is expanding and offering initial money saving benefits to churches, it is imperative for the church to borrow only what they know they can repay, regardless of what the lender is offering.

Almost everyone at some point in their life goes through the process of getting a mortgage loan.  Some people have special circumstances where they need to get mortgage loan for a different type of building.  Lenders don’t only offer mortgage loans for family homes, but they offer loans for churches as well.

For those people who work at a church, especially the pastor or leader of the congregation, at some point a mortgage loan may be needed.  You may want to refinance a current loan, get a new mortgage loan to add on to your church, build a new church, or remodel your current church.

There are loans available for all of these needs.  Some of the types of church loans that are available include standard mortgage products like:

•    Fixed rate mortgage loans.  These loans keep the same interest rate for the life of the mortgage.
•    Adjustable rate mortgages.  These loans have a fixed interest rate for a specified period of time and then the rate becomes adjustable.
•    Bridge loans.  These loans allow you to purchase or build a new church while you are still waiting to sell the building you are in.
•    Debt consolidation loans.  If the church has a lot of revolving debt or various debts to pay you can get a loan to consolidate this debt into one low payment.
•    Refinance loans.  You can refinance the loan on your church in order to get a fixed loan with a lower interest rate or take cash out of the equity in your loan in order to remodel and make improvements or additions to the building.
•    Equity credit lines.  You can get a line of credit on the equity in your church for when you need the money for any needs.
•    Church loans can be 3, 5, or 7 year balloon mortgages for those churches that want a lower interest rate and show that they can afford to make a balloon payment or refinance after the set period of time.

It is important to remember that churches also have to qualify for loans just like individuals or businesses.  In order to find out how to qualify for a church loan you can contact a local lender and inquire about their loans for church buildings.