It is quite obvious that the process of securing outside financing is significantly more complex and cumbersome than simply writing a check against the church’s bank account.

However, many church projects are made possible by outside lenders. In fact, most church building programs utilize this method of financing.

Should you choose any of the several options involving outside financing, this chapter, hopefully, will help you understand some of the steps you will have to take in order to complete the process.  

However attractive a financing program may appear, be prepared to spend considerable time and effort in preparing the documentation which any lender will require in support of your application

Before proceeding, we need to recognize the basic prevailing philosophy employed by all lenders, especially as it affects churches.  First, remember that all lenders are in the business of lending, and, they expect to earn a profit for their financial backers! With profit as their primary goal, the lender must practice a reasonable amount of caution when choosing the applications which should be accepted and funded.  Even with their most credit-worthy borrowers having an established history, lenders are usually very careful to collateralize the loan to their advantage. 

It is reasonable to expect that, when faced with a loan application from a church, a conventional lender is going to become super-cautious.  The reason…simple…no lender wants to be in a position of ever having to foreclose on a church, in the event that the re-payment obligation should not be met.  Foreclosure would spell “bad publicity” for the lender, especially if it was a local bank or credit union.

So, in order to avoid that “worst possible scenario”, lenders tend to set their comfort level higher when they consider loan applications from churches. They accomplish that by setting lower loan-to-value ratios, higher than normal interest rates or increased points for the loan. 

Don’t jump the ship just yet!

You will be pleased to know, however, that there are financial institutions which specialize in church loans… they actually view them as low risk loans. I recently spoke with just such a church lender.  His company has been in business for fifty-two years during which they had only foreclosed on one loan.

Posted: by Dick White