Church financing can be a difficult task for any church because obtaining church loans is not something a church does very often. The construction of a new church can be a thrilling event for your congregation. It’s an indication that your church is thriving.
Obtaining financing can be a daunting task and sometimes creates dissension among its members.
The church has two choices of church loan types. One could be described as a “conventional” loan, which might have terms similar to a bank loan. The other type is a church bond program.
Other ways of financing church construction are through building fund campaigns, sometimes called capital stewardship campaigns, and grants.
Church financing loan amounts are based on the annual tithe and offering figure. A good general rule of thumb is that the church can borrow about 3-3.5 times the tithe and offering. Here is how it works. If your church brings in $1,000,000 annually you can borrow about $3,000,000 to $3,500,000. If the church currently has a mortgage the mortgage balance would have to be subtracted from the loan amount calculated above. Having a large amount of assets does not increase the loan amount above the 3-3.5 times tithe and offering figure.
A church bond program differs from a conventional loan program in that a bond program involves many lenders whereas a conventional program only involves one lender. A church bond program has somewhat higher closing costs due to the brokerage fees associated with selling the bonds, however bond programs are sometimes easier to qualify for. Church members are given an opportunity to buy bonds as an investment in their own church and they generally get a better return on their investment than other alternatives.
A strong fundraiser can be a great way to raise money for church construction without having to borrow money from a bank. One way of doing this can be to have member sell various types of products and then apply the profits towards the building program. Many companies offer their products to churches to be used as fundraisers. A search of the Internet will turn up lots of companies who will partner with churches to do fundraising.
A couple of types of nontraditional types of financing exist. One involves the purchasing the architectural design and construction and paying later. The second type of financing is basically involves building the church now but buying it later. This lease-purchase type of financing can help the church build with less money down.
If the church is purchasing a property from another owner it may be able to obtain church financing from the seller as another means of non-traditional financing.
Some churches are able to obtain grant money. There are companies listed on the Internet who will write a grant request for you possibly increasing your chances of getting a grant.
Companies who specialize in capital stewardship campaigns can be helpful in guiding the church through building fundraising. These folks are professionals at motivating your congregation to give additional monies above and beyond their normal offerings.
Hiring a broker can also be a good way to locate a suitable lender for your church. Brokers tend to have many industry contacts and know how to match a lender to the church’s needs.