At the core, your church building is a tool that you use to enable your ministry. Your church’s specific vision for ministry will determine how your church should be designed and built, but securing the financing for the project is the first hurdle to jump.
The result should be a quality building that’s a good economic fit for your church’s finances. Remember, the amount you borrow should be an amount you can afford to pay back, yet should still be enough to help you reach your ministry goals. Finding the right lender and giving them the appropriate information will allow you to reach that happy medium.
Finding the right lender
Not every lender will understand the needs of your church. Many will nod their heads and agree to lend money—but they might not actually take all the aspects of your church’s needs into consideration when they agree to lend. Find a lender who has experience with helping churches finance building projects, they’ll be more familiar with the financial challenges and complexities than a lender who primarily works with other businesses. Make it a priority to discern between bankers who look at your church as, “just a church” and lenders who truly understand the significance of leadership, mission, and the vision of you church.
As a general rule, the total loan amount borrowed should only be up to 3 times the church’s total annual revenues. Be wary of lenders who are willing to lend more than that amount, because they may not understand the church’s financial situation and capabilities. Going with a lender who doesn’t understand what your church can afford might be tempting, but it will be damaging in the long run.
Guidelines commonly used by experienced lenders
Banks and lenders operate on numbers, and they inform their decisions about lending amounts based on quantitative data. That said, be prepared to offer up numerical evidence of your church’s current financial standing and congregational size. Here are a few questions that an experienced lender can be expected to ask about your church:
- Is it experiencing an appreciable pattern of numerical growth in attendance?
- Has it seen multiple successive years of financial growth? Typically, financial growth follows increased attendance and that’s a positive sign for a lender.
- What is the length of service of the current senior pastor, and what is the pattern or growth during his/her tenure? There may be different insights to be gleaned when considering a pastor who’s been there only a short time and experienced a large pattern of growth versus a long-time pastor who’s experienced a slow but steady pattern of growth.
- Is there a steady or growing number of giving units? Now, giving units are not the same as church attendants. You may have multiple individuals within one family who are giving, but they are collectively counted as 1 giving unit. In most cases, lenders or banks will require at least 100 giving units before qualification can be granted.
Have confidence and be prepared!
You’ll want to take these things into consideration and have this information handy while planning your church building project strategy. Learning the bank’s language is key in reaching a lending arrangement that will help you create a church building that will facilitate your ministry and allow you to remain a good, economical steward of your resources.
If you want to learn more about funding your church building or renovation project, check back for our free i3 webinar series in 2017. Registration opens soon!