If there’s any chance a new church building project is under consideration in the new year, it’s a good idea to begin to prepare for funding and financing now. If you do, you’re more likely to successfully secure a traditional mortgage (or any other financing) to construct your new church design. Understanding a few important elements of what lenders are looking for can maximize your potential for securing the necessary funds.
Choose a Lender that Understands Churches aren’t Residential or Commercial
It’s very important to work with a financing institution that understands churches. While a church building is certainly not a residence, it’s also not a typical business either. This means your church building project won’t fall neatly into either category. As we’ve explained elsewhere, even the zoning for your church building location typically requires jurisdictional approval, because churches are usually considered “conditional use” properties. If the lender you’re working with doesn’t understand things like this, they are less likely to understand the requirements and constraints you’re working with in your church design and development process.
Why Lenders Need to Understand Church Design
There are other reasons a lender needs to be familiar with church building projects. A traditional lender who hasn’t worked with church leaders might not understand a church’s vision for ministry in the community. They likely won’t understand the differences between the various types of churches, including the very different needs of traditional and modern church design.
But lenders who have worked with churches are will better comprehend the various constraints affecting church design and construction projects, how your ministry needs are going to impact your church design, and how leadership of a church works, that most frequently church leaders are held accountable by a church governing body.
What’s the Most You Can Expect to Borrow for Your Church Building Project?
So, once the right lender is identified, it’s time to come in with the best foot forward. Let’s start with the bottom line. The highest total loan amount you should expect to receive for your church building project is three times your church’s annual revenues. It is also a good rule of thumb on the maximum you should borrow for a project. If a bank is willing to lend you more be very careful.
In most cases, it’s unlikely three times your church’s annual revenues will be the amount you actually get. The mathematical formulas lenders work with are impacted by your responses to a number of questions about your church, its leaders, your church design, etc. These questions are designed to help them determine how much of a risk it would be to lend to your church. If you don’t have great responses to their questions, they’re going to decrease the amount of money they’re willing to loan for your church building project.
In our next post, we’ll cover in more detail the types of questions lenders ask, and how you can best respond to them. Meanwhile, to keep up with the latest information about church design and building projects, sign up today for our next free i3 webinars.