Posts by martin

The Dreaded Church Budget!!!

in Church Bond Investing, Church Bonds, Church Financing, Church Insurance, Church Loans, Funding my church, Funding Renovation

Financial management can be daunting… Few things are more stressful for church leaders than compiling the annual budget. Proper financial management can be both intimidating and at times overwhelming. Yet, good accounting practices can go a long way down the road toward financial stability for a church. A well-organized budget and accounting controls can allow church leadership to focus less on administrative issues and afford more time and energy toward ministry and outreach. Planning. Checking. Planning some more. A good church budget can provide a way to track the income and expenses giving church leadership the information necessary to make the best strategic financial decisions. When creating a church budget for the upcoming year, one budgeting approach is to start from zero and evaluate each expense line item based on the church’s ministry needs. There are many different types of expenses that go into maintaining the church, from staff salaries to computer equipment to items such as choir robes and Sunday School materials. A well-designed church budget can assist church leaders with keeping track of various costs and expenses to make certain that the necessary funds are available when needed. A good church budget can assist church leaders with keeping track of various income sources, such as tithes, offerings, and certain designated giving such as building fund contributions. Federal, state and local economic conditions at any given time can make it difficult for church leaders to forecast future income the church will receive, so consider historical income trends as one way to forecast future giving. Conservative budgeting is one way to avoid funding shortfalls. Church leaders can revisit the church budget mid-year to make the necessary adjustments to avoid overspending or underspending in important key areas. The importance of proper financial management cannot be overstated, because it is the foundation for financial sustainability and stability of the church. Good fiscal accountability can allow the church to conduct important ministry projects without the burden of worrying how to keep the lights on. A healthy budget can help feed a healthy...

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Church Bonds as a Financing Option

in Church Bond Investing, Church Bonds, Church Financing, Church Insurance, Church Loans, Funding my church, Funding Renovation

Church Financing Options There are similar features with a church bond as there are with a commercial loan, in that a church bond program is fixed for a certain period of time and has a certain repayment schedule. One of the biggest benefits that church bond financing can offer a church that most conventional bank loans cannot provide, is that church bond financing can provide churches with a fixed interest rate and repayment schedule similar to a fixed rate residential mortgage loan. On the other hand, with church bond financing, the church has more flexibility and control since the interest rate and the amortization or repayment period is fixed the full term of the church bond issue. With church bond financing, the church is effectively setting up a permanent repayment plan for the entire term of the bond program. With a church bond program, the church is paying the interest on the church’s loan to church bond investors, such as members and friends of the church, and other church bond investors and not to a bank. Consider All Church Financing Options Consider all options when seeking financing for your church. Conventional bank financing can be a better financing option under certain circumstances. For example, if a church is only in need of short-term financing, then a bank loan may be the better option. However, if the church needs or wants the certainty of a long-term fixed interest rate and repayment period, then church bond financing may be the better financing option. Church bonds can give the church a long-term, fixed interest rate and repayment period that it would not have with a commercial bank loan. And, many churches with long-term capital needs prefer that the interest paid on their church loan go directly to church members and other Christian investors, instead of a...

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How Loans Can Be Bad for Your Church

in Church Bonds, Church Financing, Funding my church

The Loan Arranger Whenever a church begins a construction project, renovation project, or purchases property for a new church facility, and doesn’t have enough money to pay for these projects, often a church will seek a conventional bank loan. Most people are familiar with residential mortgages, but since a church is a non-profit organization, churches require a different type of mortgage or loan, commonly known as a commercial loan. By comparison, the length of time until the loan matures, the interest rate and the repayment schedule are three features that set a commercial loan apart from a residential mortgage. I’m listening, but how can loans be bad for my church?  Okay, we will get to that in a moment. To better understand why considering various church financing options are an important issue when looking for a financing solution, we need to look at the way a commercial loan works. With certain types of residential mortgages, the interest rate and repayment schedule or amortization can vary, but in many cases those interest rates and amortization schedules are fixed for up to as much as thirty (30) years of the mortgage loan. In other words, in the case of a thirty (30) year fixed-rate mortgage, that is 360 months of paying the same payment amount until the mortgage loan is retired, or paid back. On the other hand, with a commercial loan, the interest rates and repayment schedules are different from a residential mortgage. The stated interest rate and amortization schedule are not fixed. In the case of a commercial church loan, in the beginning, the amortization schedule may be set for as many as twenty (20) to twenty-five (25) years, but the church loan usually will come up for renewal or become due after the first three (3) to five (5) years. The final payment on the renewal or due date is what is referred to as a “Balloon Payment”. When a church’s balloon payment comes due, the church is faced with the decision to either refinance the existing loan at what can be a higher interest rate and payment, or search for a new loan with another lender. So while the initial interest rate and loan payment of a...

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Prepare for the Worst

in Church Bonds, Church Financing, Church Insurance, Church Loans

When the unexpected happens… The practice of risk management and insurance coverage usually isn’t something church leadership thinks about on a regular basis. However, the proper comprehensive insurance coverage can help your church to prepare for the unexpected and to maintain a comfortable environment for your members. Churches are subject to lawsuits just as any other organization. Getting the proper insurance coverage is an essential and necessary step to protecting your church and its members for many types of losses. While insurance protection does not eliminate a good safety plan, it can be a valuable tool. What does this have to do with church financing? Everything. When financing or refinancing your church loan with church bonds, funds become available for a new church facility or various capital improvements of the existing church building. Because many churches will utilize volunteer help with various construction projects, what happens if something breaks or falls on that person? Your church can now become liable for those damages. This is why having the proper insurance coverage is a necessity for a church or ministry. Okay you’ve convinced me, now what do I need? There are two basic types of insurance coverage that you should consider for your church: 1.) Property Coverage – This includes specialized forms of insurance coverage for the church buildings and equipment that provides for certain financial reimbursement to the church for most risks, in the event of destruction from fire, theft, and certain natural disasters. It should be noted that many basic property insurance policies do not cover losses from floods and earthquakes, so if your church is located in a high-risk area of these occurrences, make sure that your church has additional insurance coverage for the possibility of losses from these catastrophic events. 2.) Casualty Coverage – This type of insurance coverage broadly covers the risk of financial losses not directly concerned with life insurance, health insurance or property insurance. In general, casualty insurance covers the legal side of things, whether it is property damage or injury to a church member, worker, or visitor. Having the proper casualty insurance coverage can help prevent financial losses to the church from unforeseen lawsuits and medical bills. It is important to note that...

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Securing Financing for Your Church Part 4

in Church Bond Investing, Church Bonds, Church Financing, Church Loans, Funding my church

In this article, we will discuss the final two of the Five Practical Steps in Securing Funding for Your Church  4.) Put together a good project team. Just because you are a church, that doesn’t mean that you can’t use the same mindset employed by other successful businesses and organizations. Most successful companies put together project teams that communicate well, and at the same time are team players. Successful business leaders surround themselves with talented, hard-working people. Likewise, select someone from the Church to head up and establish a project team. Delegate as much authority to that person and team as they need, so they can keep the project moving in the right direction. In many instances, this person may need to be brought on staff full time to handle the project, so as to not strictly rely on volunteers to handle the project. 5.) Consider Church Bonds versus a Bank Loan. When a church secures a bank loan, that church is borrowing from the bank, and that bank loan is indirectly funded by the bank’s depositors. In many cases, the bank will have an interest in the church’s success, but the bank is more concerned with charging and receiving interest and fees on the money loaned to the church. One difference between a Bank Loan and a Church Bond is that the church bondholders are the lenders the money to the church. In the final analysis, the lending agreement of a church bond loan is between the church and the bondholders, collectively administered by an independent bond trustee. Church Bonds effectively cuts out the middleman, i.e. the bank. Banks can make more money by making loans that have a longer amortization, or payback period, which in most cases mean adjusted interest rates, and more interest and fees paid by the church to the bank throughout the term of the bank loan. On the other hand, when a church issues a Church Bond, that church has more flexibility and control of the church’s loan and repayment of that loan by having a fully-amortized, fixed interest rate throughout the entire period of the church bond loan. Securing financing for your church can be a difficult task, but in many cases...

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