Securing financing for construction projects is the most critical step for any church seeking to provide new ministry space. In the last three years the requirements imposed on organizations seeking funding have greatly changed.

The most significant change within the lending process is a new regulation imposed on banks by the banks themselves and by the government. Specifically, in 2011, the Frank/Dodd bill became law and affected church loans via the appraisal. The law imposed large penalties on inferior appraisal practices. The immediate response of appraisers was to become much more conservative which effectively and dramatically lowered estimated property values.

This practice continues today and does not appear to have an end in sight. Today, the typical appraisal is only 50% – 60% of the value of new construction. A bank will only lend 70%-80% of the appraised value. This requires the church to come up with 20%-30% more cash up front in order to secure a loan and begin a project.

Today, it is more important than ever to build a strong financial base. This includes:

Accurate and professional financial reports for at least the past three years. Documented growth in attendance and finance will demonstrate responsibility and strength making you a good “risk” for any lending institution.

Start saving now. Chances are you will need some “up-front” cash for any future project. The stronger you are financially, the less dependent on approvals from lending institutions.

Look for all sources of lending. Some church lending groups will cross denominational lines such as The Wesleyan Investment Fund (WIF) while other denominational lenders will stick within their denomination. Check them out.

Start planning early. Now more than ever, it is good to get a realistic idea of what your vision will cost. Rarely can churches afford the big vision all at once. Planning will help you figure out what piece of the vision you can realistically afford.