How to Get a Church Loan

Church Loans

Churches can borrow money for projects such as; new constructions, renovations, to buy land, to buy an existing building, for repairs and to build a sanctuary. Many mortgage lenders specialize in church lending and have special programs targeted for church real estates. Other financial institutions like banks offer loans to churches that meet certain financial requirements. Use these steps to help you apply and get a church loan.

Instructions

1. Prepare the church's financial statements. Some lenders require certified statements and others just required internally prepared financial statements. However, the majority of lenders require one of these two types. Balance sheet, income statements, operating cash flows and taxes are the most basic statements generally required by lenders. Lenders are interested in knowing how much debt the church has outstanding before issuing a new loan.

2. Identify how much money the church can afford to borrow. After an analysis of the income statement and cash flows, the church can estimate how much money it has to repay the loan. It's important to use conservative estimates to account for fluctuations in church collections and other revenues.

3. Consult with traditional banks and mortgage companies. Identify at least three of these lenders and find out if they have church loan programs. Institutions that have these programs in place are better equipped to deal with the borrowing needs of a church. Compare their loan terms, repayment conditions, points and fees to arrive at a decision. Make sure to demonstrate that the church can meet the loan payments. Banks and mortgage companies are usually the cheapest source of capital.

4. Consider issuing church bonds. Many churches issue debt through bond issues to raise needed cash. Bonds can be issue privately or to the general public. Private offerings are made to church donors and the congregation, while public offerings are open to the general public. The church has to pay interests on a periodic basis to the bond holders. The interest rate is generally higher than for a loan. Additionally, the church has to hire a company to do the bond underwriting for a fee.

5. Secure a church loan broker. Loan brokers are familiar with many of the lending requirements of banks and other financial institutions. Brokers may also know who the best lenders are in the local area and which companies have special church loan programs to meet specific needs. Fees charged by loan brokers varies depending on lending trends and loan amounts. The fees can be as low as .5% but can go much higher into the double digits. However, these fees are often negotiable.