Church Loans

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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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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Securing Financing for Your Church Part 3

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

Earlier, we discussed Five Typical Church Financing Issues churches and church leadership can face when begin the process of Securing Financing for Your Church. However, the following are Five Practical Steps in Securing Funding for Your Church: Five Practical Steps in Securing Funding for Your Church  1.) Realistically Assess the Final Value. Some churches will engage the services of a licensed real estate appraiser to realistically assess the “As-Is” as well as the “As-If Complete” final value of the church’s proposed renovation or construction project. 2.) Long. Term. Strategy. Make sure those three words are a part of your vocabulary. The most important phase of any church renovation or construction project is to plan for the future. Church Leadership, assisted by various outside professionals, can assist in determining the church’s long-term facility, land, and renovation needs. The church’s Long-Term Financing is just that, a long period of time that the church will be affected by how the construction project is funded in the beginning. 3.) Develop a Balanced Budget. In order to plan properly, it is important to determine what the church can realistically afford to spend. It is not uncommon for a church to consult with architects and contractors before speaking with a lender. A lender that understands church financing can provide important details, such as how much the church can effectively afford to spend, and what a realistic interest rate on the proposed church loan will be. Input in the planning stages from a reputable church lender may help to avoid costly delays and possibly avoid any disappointment the church may experience during the renovation and construction process. In the next article, we will discuss the final two of the Five Practical Steps in Securing Funding for Your...

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Securing Financing for Your Church Part 2

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

In the previous article, we discussed the first two of Five Typical Church Financing Issues churches and church leadership can face as they are Securing Financing for Your Church. 3.) Church buildings are a special-purpose facility. Lenders are concerned that if the church defaults on the church loan by failing to make timely payment of principal and interest payments on the church loan, that the lender will be required to foreclose on the church and assume ownership and sell the church facility. This can make it difficult for the lender to recover their original investment, because most church facilities are built to look like a church, and in accordance to that particular congregation’s beliefs and tradition. This can make it difficult for the lender to sell the church facility knowing that they might not be able to get back their investment. 4.) Change in the church’s nonprofit corporate tax status could adversely affect its revenues. Churches operate as a nonprofit religious corporation and as such currently qualify for various exemptions from state and federal taxes. Under current tax law, churches receive contributions from donors that are deductible for those donors for certain federal and state income tax purposes. The elimination of any or all of these income tax exemptions through legislative action or otherwise, could adversely affect the church’s revenues and its ability to repay the church loan. 5.) Many lenders frequently require personal guarantors for church loans. Personal guarantees of the church’s loan is not always appropriate for church financing since not all churches are governed by one individual. The financial structure of many churches do not lend itself to the typical lender/guarantor financing model. The lack of personal guarantees could cause certain lenders to be unwilling to make a loan to a church. Only after one or more members of a church have provided personal guarantees will some lenders provide funding. In addition, a lender’s requirement of personal guarantees can cause internal friction among certain church members in the event that a member, that has personally guaranteed the loan to the church, should decide to leave the church. In the next article, we will discuss practical solutions for Securing Financing for Your...

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