There is a lot of information to be found about church financing, and it can quickly become overwhelming, particularly for a church that does not have experience in lending. Christianity Today has an article, Getting the Money You Need, which answers all of the basic questions that you probably have about getting started with the church loan process. It is a compilation of several common church financing questions, that do not go into a ton of detail, but are a great starting point for basic church lending information. Additionally, be sure to check out the important questions that you may want to ask your lender!
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Since most churches cannot afford to pay the cost of building a new facility or improvement projects on a current facillity, they are often in need of additional financing.
Here is a great resource containing numerous church financing related articles, including on called The Best Money a Church Can Buy. This article emphasizes the importance of doing research before deciding on a form of church financing (mortgage, best efforts bonds, etc.) and prior to choosing a lender (commercial bank, bond finance company, local bank, etc.).
There are a number of financing options available to churches that many people may not even be aware of; additionally, there are several sources through which a church can obtain funding, which is why it is crucial to conduct research to find the source that best fits your church’s needs.
Check out the article for more information about the different types of financing options and lenders, as well as a number of tips that are likely to help improve your church loan process.
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.