Churches are non-profit organizations that rely on donations to fund their missions, but if your church is stuck in a financial bind, it takes more than faith and some goodwill offerings to get out of debt. You will need to seek help from financial institutions and get a church loan, which can be tricky to tackle since specialty lenders often handle it.
Church loans allow religiously-affiliated properties to have enough funds to expand, repair, or acquire new land to develop into a new church for a community. The loan type essentially follows the same format as other commercial real estate loans, but it’s important to take your time to ask questions before agreeing to take a church loan since it’s considered one of the most challenging asset classes.
So before you start the church loan process, it’s worth asking the following questions to help you make well-informed decisions down the road:
Can Your Church Actually Service a Loan?
Before anything else, the most important question to ask is whether your church can afford to take on a loan. Since churches often rely on donations, does it have any land or assets as collateral for the loan?
If not, does your church have consistent income statements that prove you have a positive cash flow to meet monthly payments? It’s crucial to lay down your financial situation first before starting the loan process, so you can be sure that your church has the means to make timely payments for the loan throughout its duration.
Can Your Church Afford a Loan Down Payment?
You may have a stable cash flow to keep up with the loan’s monthly payments, but getting a church loan requires a 25 percent down payment in cash, equity, or other sources. If your church can afford to pay the down payment, you have a higher chance of getting approved for the church loan.
What is a Comfortable Percentage of the Monthly Loan Payment for a Church?
Lenders now offer loans with significantly lower interest rates, so they often offer up to 25 percent of the church’s total earnings dedicated to paying off the loan. However, that percentage can still be strenuous for a church since it doesn’t necessarily receive a stable income, so it’s worth raising your pledges through a capital campaign to help boost your finances for the loan.
The Bottom Line: Taking Out Church Loans to Meet Your Religious Goals
There are many reasons to take on a church loan, but before you do, take the time to consider what God’s vision is for your church. Some desires to expand may not be a necessity as it stems from a personal longing, but if you know your community can benefit from the changes you plan on making, then it helps to consult with a mortgage company that can further educate you on these matters.
Are You Looking for the Best Church Financing in Los Angeles, USA?
If your church is strapped for cash and needs some financial aid to continue serving the people in your community, then it’s looking for private money financing solutions from trustworthy lenders in your area.
Our mortgage brokers at Century City Mortgage can take the guesswork out of your church loan applications by offering church financing services that cater to different financial needs, so get in touch with us at 310-557-1212 to see how we can help your church move forward from this financial bind.