In our last post, we briefly explained three common ways to fund a church building project. One of those is through traditional lending institutions. For churches considering this option, it’s important to understand how lenders determine the loan amount for which a church might qualify. Here’s a breakdown of key expectations church leaders should have to realistically plan for funding their church design with a traditional loan.
How Much Can a Church Borrow?
Traditional lending institutions that specialize in working with churches typically begin with a standard formula to determine loan eligibility: a maximum loan amount equal to up to three times the church’s annual revenue. So, if your church brings in $300,000 annually, the most you should expect to borrow is around $900,000.
Some lenders might offer slightly more, but this should be approached with caution. Borrowing beyond three times your revenue increases the financial risk significantly. Churches that overextend themselves with too much debt can quickly find themselves in money trouble. The goal is to steward church resources wisely while moving forward with your vision.
Factors That Can Lower the Loan Amount
While three times annual revenue is the theoretical maximum, most lending institutions won’t automatically approve that full amount. Instead, they evaluate your church’s financial health and stability based on several key questions:
- Is your church experiencing consistent attendance growth?
Lenders want to see that your congregation is expanding. A growing church suggests increasing revenue potential, making the loan less risky. - Has your church seen multiple consecutive years of financial growth?
Positive financial trends are a strong indicator of stability. Being able to provide detailed financial records and reports helps demonstrate this. - What’s the tenure and leadership track record of your senior pastor?
A long-standing, stable leadership is another sign of organizational health. If your pastor has led the church through sustained growth, that works in your favor. - Has the church maintained or increased the number of giving units?
A growing base of committed givers is one of the strongest indicators of a church’s financial future.
If the answers to these questions are not favorable, the amount you qualify for will be less than the three-times benchmark. While it may be disappointing, the lender is protecting both their financial position and that of your church.
Understanding Giving Units
Lenders will pay particular attention to the number and consistency of your church’s giving units. This isn’t the number of people in your church contributing. It’s better defined as the amount given by a household. For example, a married couple who both work and tithe regularly are counted as one giving unit. Even if their child also contributes, they still count as one unit. Also, lenders are looking for regular givers, those who contribute a meaningful amount on a consistent basis. A one-time $10 gift doesn’t count toward this metric. Churches with fewer than 100 giving units won’t likely qualify for a loan at three times annual revenue, regardless of the total amount.
To explore how to best prepare your church for a building project, whether it involves financial considerations, or design and construction details—we invite you to attend our free i3 webinars. You’ll gain insight into many elements of the church design and church building process. Visit our website to sign up.