Certain risks are associated with investment in church bond offerings. Potential investors should carefully consider the risk factors as set forth in the prospectus for the offering. Outlined below are certain selected risks associated with church bond offerings in general:
- The issuer (the church) is dependent on voluntary contributions for its operation and for payment of the principal and interest of the bonds of the offering. There is no assurance such contributions will increase or remain stable. Failure to achieve an anticipated amount of contributions could adversely affect the issuer’s ability to repay the bonds.
- Properties that serve as collateral for church bond offerings are for the most part special purpose facilities for which there may be a very limited market. There is no assurance such properties can be sold for stated values.
- If the offering involves the construction of new facilities and such facilities are not completed as anticipated, the value of the property that serves as collateral for the bonds could be adversely affected as well as the issuer’s ability to repay the bonds.
- There is no secondary market for the bonds nor are the bonds rated by any nationally-recognized statistical rating organization.
- The bonds are subject to early redemption by the issuer. Investors have no right to require the issuer to redeem any bond before maturity.
- The issuer’s senior minister/pastor typically serves a significant role in the leadership, management, growth, and viability of the issuer as a church, and the loss of such person’s services could have a material adverse affect on the issuer’s ability to repay the bonds.
- There are no income tax benefits upon the purchase of the bonds.
- When bonds are sold on a best efforts basis, there is no assurance all bonds of the offering can be sold and all purposes of the offering completed in full.
There are other risks to be considered that are more fully described in the prospectus for the offering. Investors should read the prospectus carefully before investing and consider any potential investment based upon their individual financial situation, investment objective, and risk tolerance.