Financing Your Churches Future Home
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.
If you are planning to move in the next 24 - 36 months and you need to sell your current location in order to move, then you really need to put your building on market now. Most churches shy away of this idea because they want to find a building to buy first. But even if you find the perfect building, it will probably be gone by the time you sell your building so you can pay for the new one. Many times churches worry about selling their building and not finding a new one, leaving them homeless, but you can structure an agreement that will protect you from this situation.
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.
It is important that the lender you work with is one that truly understands church; understands that you don’t make a profit. Most banks are accustomed to dealing with for profit businesses and are clueless on the ways churches work. You are far ahead of the game by working with lenders that have successfully financed churches in the past year. Just like the analogy of the doctor, it’s best to deal with a church friendly lender.
As you choose a lender you will be best served by talking to several and finding the right fit between you and the lender. This is normally a long relationship you are building so do so carefully.
Once you have made the choice and start through the application process you will be asked for all the normal information on your church, financial history, attendance records, cash positions, equity in building etc. The lenders will then qualify your church and give you a good idea of the amount they would be comfortable loaning your church. This allows you to shop with confidence and once you find a property that meets your needs you can offer with confidence and be able to close in a timely manner.
In most cases the lender will want you to have 25% - 35% equity in the new property. This is just a guide and many lenders are already on the high end of this scale. Most churches will have to run a capital campaign to raise additional cash. Some will do it themselves and others will use professionals. Many lenders prefer the professional fund raisers because they raise more and collections typically run higher. We will talk about this topic in a future article.
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.
