Church    Financing       Center

The application process for a church loan is complicated enough as it is, but when you are unprepared the process will only become more difficult and time consuming. Having all of the proper documentation and knowing how to organize it can easily prevent such a problem, not to mention make a great first impression to the lender.

Christianity Today magazine addresses this topic and encourages churches to prepare well in advance of the actual application process in order to ensure that all of the necessary documents are in hand and have the correct information. The church loan process must be addressed in a business like manner rather than simply having a vague vision in mind.

Since the church financing process is knowingly complicated, it is far more than one individual person should be expected to handle alone. The church should develop a team of individuals to handle the task, particularly individuals who will be able to speak on behalf of the accounting, law, real estate, banking, and architecture aspects of the project at hand.

With a team of prepared individuals working together, the church loan process should run much more smoothly. To ensure that this is the case, and guarantee that you are properly prepared for the application process, use Christianity Today’s Loan Application Checklist, available here.

If your church is looking to build or expand in the near future, here is an article that explains each step of the church loan process in detail. While the process is somewhat similar to the standard commercial loan process, many people do not have a great deal of experience in this area. For that reason, this article is a good resource for understanding how the typical church loan process works, and can help churches prepare if they are looking to obtain financing for a construction project in the future.

Click here to read the article.

While researching for information about church loans and church financing, it’s easy to come across materials that can point out what major obstacles often arise during the loan process. These include problems that you’ve probably already heard about, such as difficulty obtaining a loan due to a church’s unique status, etc.

This most recent article I came across goes beyond just identifying the major problems that church’s face and does a great job of explaining why certain factors are problematic. For instance, it’s easy to understand that a church is unique from a typical business that might be trying to obtain a commercial loan, but the reason that lenders hesitate to lend to churches is that if the mortgage is not paid by the church, the property would be very difficult to sell because of its specific, unique layout. This is much different than a standard commercial building which can be easily sold and accomodate just about any other business.

Check out this article to find out more about the 4 major problems that churches face when obtaining financing and understand specifically why these problems occur.

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.

The lease-purchase program available to churches is a great option for a church that is currently renting and looking to build a new facility, but is having trouble obtaining financing to do so.

The basic idea of this program is to allow a church to begin construction on a new facility without paying for the loan until the new building is complete (preventing the church from paying rent at the current facility while also making payments on the construction loan). After the completion of the new facility, the church will move into that building under a lease agreement with the option to purchase within 3 years.

This program is perfect for churches looking to build as soon as possible, as well as newer churches that may not be able to obtain the financing for a conventional church loan.

For more information about the church lease-purchase program, check out this article.

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.