Getting a Church Loan
Today, a capital campaign is often required in order to qualify for a church loan.
While some lenders have just stopped lending to churches the money is out there, its just getting harder for the church to qualify for the loan. Today, and for the foreseeable future, lenders are requiring much more documentation from the church and are generally lending lower amounts.
As one lender recently stated, "Cash flow is King, and cash on hand is Queen." What many lenders will require is at least 20% of your church building project cost in cash, and a monthly net positive cash flow that is 120-125% of the loan payment. For example, if you are contemplating a $1M building program, you can expect that the lender will want to see at least $200,000 in cash and financial reports that demonstrate that the church has had at least $7,200 per month of income in excess of expenses for the past 6-12 months! These criteria make it very difficult for the church to borrow today without significant preparation, as most churches are not in this situation, even though they have a need to build.
To qualify for a loan, the church needs money in the bank and a history of positive cash flow.
Increasing both income and cash on hand is accomplished through a church capital campaign. Historically, the vast majority of churches have waited until they were about to build or were in the process of construction before beginning a capital campaign. Many churches that need to build will not be able to get financing and begin construction until later this year or even next year because they cannot meet the new lending requirements of cash on hand and cash flow. Although the church may have equity, even cash equity, if it cannot show a history of adequate positive cash flow, the church will probably not be able to get adequate financing.
Read this article that appeared in Executive for Christ Magazine on
Two Key Requirements to
Qualify for Church Financing.
Many churches are going to come to the hard realization that they cannot get the financing they need and that to qualify will take them many months of demonstrated financial change. I believe we will see a large number of churches want to enter into capital campaigns very soon so they may build next year. Remember, the banks will want to see 6-12 months of positive cash flow greater than your anticipated mortgage payment before approving the church loan.
The wise church will get their capital campaign underway as soon as possible, especially in view of the time it takes to prepare and execute a campaign. The Abundant Giving - Self Directed Campaign is the most cost effective way to prepare your leadership to lead your church in this exciting and rewarding program. You can do it, we can help. Please contact us for more information.
