A Roadmap to Church Loans and Financials
As congregation numbers swell, church leadership is often forced to quickly remedy overcrowded worship spaces. This often means expansion or new construction, which can be very expensive. To complete a project, you will need to know the ins and outs of financing your new steel church building. We recently spoke with John Berardino, president of Griffin Capital Funding, about church loans and financing to provide some reliable guidelines for you to follow.
What are Lenders Looking For?
Before you rush to the bank for a new church loan, consider what potential lenders will be looking for before approving a loan. At the center of all loan agreements, of course, is trust. Lenders want to know they can trust a borrower to pay back the loan.
So what’s the best way to show your church will be a consistent and reliable borrower? Berardino outlines a few of the basic requirements of the loan application process.
How Much Can Churches Borrow?
Submitting as much financial information as possible is preferable and can affect how much a church is able to borrow. A normal church can borrow up to about 4 times gross tithes and offerings, but it can be as high as six times its gross tithes and offerings.
Some churches are hesitant to apply because they lack a substantial credit history. According to Berardino, that’s not a problem. “Bottom line: the lack of church credit is never seen as a negative.” That’s encouraging for new and developing congregations that have yet to need extra funding.
Under normal circumstances, Griffin Capital does not pull the personal credit of the church leadership, so any credit problems they have personally are not usually taken into consideration.
What Type of Church Financing?
There are a couple of options when it comes to the type of church financing.
The first is a mortgage, which is common for large construction projects. Mortgage loans usually are more than $75,000 and require the borrower to put up current facilities or land as collateral.
Long Term vs. Short Term Mortgages
A long-term, fixed-rate mortgage locks in your monthly payments for a long period of time, providing a predictable but potentially costly payment schedule once interest is factored in.
A short-term, variable-rate mortgage has a sliding interest rate depending on national rates. This can lead to inconsistent payments but also allows the borrower to pay off the loan quickly if they’re capable.
2. Unsecured Church Loans
Another option is an unsecured church loan. These types of loans are most commonly used for smaller renovations or equipment upgrades. Since these loans are usually smaller than mortgages, they are more easily secured.
So you’ve gathered all of the required documentation, and you feel comfortable that your church is prepared to secure a loan. But which lender is the right one for your church? It’s wise to work with a lender that has experience in church financing and is familiar with the process.
Church Loans Are Not Commercial Loans
Church loans are different than commercial loans, and a responsible and experienced lender can help you navigate through completion of your project and beyond. Griffin Capital has been a consistent and helpful lender for 21 years and has a wealth of experience in church financing.