Securing Financing for Your Church Part 1

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

Basic Understanding of Securing Financing for Your Church 

As you begin the process of Securing Financing for your Church, many churches and church leaders may encounter certain challenges that are unique to church finance. The process of securing financing for a church can be one of the more difficult loans to secure, because a church loan can require a specialized commercial real estate loan that in many cases is not widely available. Churches are not like other business organizations primarily because churches are dependent upon voluntary contributions, the loss of the senior pastor’s services could adversely affect the church’s ability to repay the loan, church buildings are a special-purpose facility, a change in the church’s nonprofit corporate tax status could adversely affect its revenues, and many lenders frequently require personal guarantors for church loans.

 

Five Typical Church Financing Issues 

Before the solutions to the issues many churches face when attempting to secure financing can be properly addressed, it is important to understand Five Typical Church Financing Issues churches and church leadership can face as they arrange financing for their church.

  1. Churches are dependent upon voluntary contributions. 

    Churches are dependent upon voluntary contributions of its membership and attendees as its primary source of support and income. Lenders realize that in the future that there is no assurance that church membership, attendance or per capita contributions will increase or remain stable. Future contributions to the church may fluctuate due to factors such as a decline in the national, regional or local economy, changes in key church leadership and staff, or other unpredictable conditions. Consequently, there is no guarantee that the church will be able to make timely payment of principal and interest on the church’s loan in the future. 

  2. Loss of the senior pastor’s services could adversely affect the church’s ability to repay the loan. 

    The church’s senior pastor serves a significant role in the leadership, management, growth and viability of the church. Lenders understand that the loss of the senior pastor due to resignation, retirement, termination, disability or death is indeterminable and could adversely affect the church’s ability to repay the loan.

In the next article, we will continue our discussion with three additional challenges that churches and church leadership can face when Securing Financing for Your Church.