How to Get a Loan to Start a Church

Loan repayment requires adequate giving by the congregation.

Financing a church is a relatively common process as evidenced by a Dave Ramsey's article stating that the church in America is $33 billion in debt. Building a new church, expanding an existing facility, adding a fun park or renovating an old parsonage is an important decision to a local church body. Applying for a church loan is typically quite straight-forward, often easier than applying for a loan for a business or a private home. There are, however, several steps in this process and preparation is quite important.

Things You'll Need

• Copy of Articles of Incorporation
• Copy of church by-laws
• 1-2 years' bank statements (if applicable)
• Letter of resolution or statement of intent verifying the loan is authorized
• Board of Director's contact information

Instructions

1. Meet together with like-minded Christians to plan your new church. Create a Board of Directors to incorporate your group into a legally represented body. Decide whether you should borrow money for a church or if self-financing over time may be an option.

2. Seek a location for constructing your church building with the help of an architect or find an existing structure. Canvass your community to determine if there would be interest in attending your church. Begin a preliminary budget allowing for how many people you would like to seat and for the general layout of your structure including operating expenses, pastor's salary and other ministry considerations.

3. Draft an Articles of Incorporation and register it with your state's secretary of state's office. Apply to be an IRS 501(c)(3) charity so your congregants can make tax deductible contributions to the building fund and in the future. Seek local permits, if applicable, for your proposed construction or purchase site.

4. Draft a set of church by-laws explaining the general processes of the church including church board meetings, church body business meetings and other items of a religious or secular nature. Consult with your denomination or an attorney for help drafting this document.

5. Gather together a down-payment of typically 10 to 25 percent of your loan amount. Some churches will meet in a rented structure to gather offerings for this purpose until ready to apply for this loan.

6. Present your loan application, articles of incorporation, by-laws, financial data, insurance information and other required documents to either a private lender or one specializing in church financing.

Tips & Warnings

• Some lenders may require information on your proposed pastor such as work experience and stability. Some lenders may require a personal guarantee from the church board if there is not enough documented success as to starting a church among the board or the head pastor. Others may give preferred interest rates for a personal guarantee.

• Consult an attorney to fully understand the loan terms such as prepayment penalties and closing costs. Consult an attorney about applying for and maintaining 501(c)(3) tax exempt status.

References

• Ziegler and Company: Religious Organization Church Finance
• Thrivent: Church & Institution Financing
• Church Loans: Church Loan Financing
• Dave Ramsey: What Could The Church Do...Debt-Free?; August 2009
• U.S. Internal Revenue Service: Applying for 501(c)(3) Tax-Exempt Status

Resources

• Church Loan: Is it Better to Buy or Build a Church
• California Church Loans: BDM Mortgage Services Church Loan Financing Specialists of California
• Church Loans and Investments Trust: Financing
• Church Loans and Investments Trust: First Contact Summary
• Crown Financial Ministries: Church Bonds and Church Expansion