Financing Your New Church

Posted by Bill Travis

For most churches the purchase of a new church building is the largest financial transaction most of the members of the church have ever been involved in. As a result the process is one that can become intimidating to those charged with the responsibility to represent the congregation. It is a serious responsibility that in most cases will determine the location of your church for the next 30 - 40 years.

Choosing a team is an important task that should be done as soon as you are seriously considering a change. Having people that know their way around the process will make the task much easier. Let’s put it this way, if you were having chest pains, classic heart attack symptoms, you would likely want to see a doctor quickly, right? The closest doctor is a podiatrist so that is where you would head, right? Wrong! Well, why not, he’s a doctor. No, you want a specialist who understands the heart well, who works with heart patients everyday. Same is true when you are planning to move your church, find church professionals that know their way around the process, that go through it several times each year, not once every 30 or 40 years.

This is one of the first things that I ever mention to a church; is to find a church friendly lender and do it very early. This is so important, because at you as you start shopping for land to build or an existing church you need to know exactly how much money you can spend. You can save yourself a lot of time and heartache and put yourself in position to gets a deal done when they are available by getting your banker on your team early.

Money talks in real estate transactions and most churches have their cash tied up in their current building. If you plan to move in the next 24 to 36 months you need to get your building on the market now. Get the building sold, don’t worry about making your church homeless, lease back arrangements can be made to make the transition to your new church home go smoothly.

The first step that many churches take in the relocation process is to find a building that they want and then they search for financing so that they can pay for it. The problem is that most of the time sellers or both land and buildings are not usually willing to wait for you to sell your building and put together a loan. In order to put yourself in the best position to get the best deal is to get you money in hand, including equity from your current building and any loans needed.

Most lenders do not understand “Church”; they can’t look at you as a “personal account” so you fall under the commercial lending area. Most commercial concerns make a profit. Most churches don’t. Lenders almost never foreclose on churches (bad public relations to be the bank that closed the church) so they have to qualify churches differently than most other commercial accounts. In my experience you are light years ahead of the game by working with lenders that understand church, and there are many that do. As mentioned above, it’s best to deal with church professionals.

You can see from the length of the relocation process, that this is a long term deal. You will be involved with your lender for years to come. This is why it is so important to find a goof church friendly lender with whom you can create a comfortable working relationship with. This is why it is important to make the right choice.

Now you have narrowed the field to a small number of lenders that fit you, you are ready to begin the application process. In this process you will learn from the lenders how much they can loan you. That information plus the equity and any campaign funds you have collected will allow you to make offers in confidence. That confidence is important to the sellers you will be working with.

Many lenders will want you to have around 25% - 35% equity in your new building. In order to raise money, many churches will run capital campaign. This is another area that many churches try to take on themselves. Typically when churches do higher a professional to come and manage the campaign the professional campaign will usually raise about 2 - 3 times the amount of the money that an “in house” campaign can raise. It is a good idea to speak with multiple capital campaign companies, and find one that is a good fit.

In summary, pray, plan every move well with the help of church professionals that have successfully completed church projects and can partner with you for a successful relocation for your church. Next time we will discuss some of the financial options available for churches today.

Tags: Finance

Under Finance Tags: Finance