Church Construction Loan

Church Construction Loan to Permanent Loan Program

Our network lender programs combine the church construction loan and permanent financing of your project. You qualify for the loan once, lock in the permanent rate, sign one set of loan documents and have up to 12 months to complete the construction.

During the construction period, interest is charged only on the funds that have been disbursed. When the project is completed, the permanent loan period begins.

This is a "One Time Close" church construction loan program to finance the construction of a new sanctuary, educational wing, gymnasium, etc. providing both the construction financing and permanent loan all in one closing. This means that you sign only one set of loan documents and do not have to worry about re-qualifying, re-appraisals, additional closing costs or signing additional loan documents.

Unlike a purchase transaction of an existing church, a Construction To Permanent Loan involves determining the value of something that is not yet constructed! To assist the appraiser and the lender in determining the value of the structure after it is built, information must provided as to:

• What is going to be built or constructed?
• What materials are going to be used?
• How much will the material cost?
• How much is the actual work going to cost?
• How much did the land cost, what is it worth today?
• How much will be spent on plans and permits

You will have another very important item to be concerned with, which is your organizations choice of the general contractor who will be awarded the contract and the actual text of the construction contract. From the general contractor, the lender will need a resume and a builder's application to be completed along with a credit check.

This is for your protection as well as the capital provider's, and ensures that he/she is experienced, has a proven track record, and will be able to perform under the terms of the contract.

In addition to the above, our network lenders will of course need the standard income and credit documentation that is required in any real estate transaction.

Church Refinancing

GET CHURCH LENDERS COMPETING FOR YOUR REFINANCED CHURCH MORTGAGE

  

If you are considering church refinancing, the first steps are determining your short and long term goals and then evaluating the different types of church refinancing programs that are available to you.

Once you have your goals to what's available, you will be able to make an informed decision on how you want to proceed. The first thing to consider is your current interest rate. If the church was bought when interest rates were high or if you have an adjustable rate mortgage, chances are refinancing to a different- lower term may be able to save your church money immediately and over the course of your church loan.

If you purchased or financed when interest rates were low, church refinancing may not be the best thing to do. In the past, it was a general rule that refinancing makes good financial sense if your current interest rate is at least 1.5 percentage points higher than the current market rate and your church or organization plans to reside in the church for at least 3 years.

Consider a church refinance:

• Shorten Church Loan Terms and Reduce Interest Costs
• Church Debt Consolidation
• Request a Free Analysis for Church Refinance Savings! The most competitive interest rates!

Church Financing Parameters

ChurchCa$h Consulting uses the following parameters to determine whether we can assist you.

• 33% Income Test- Your organization's annual debt service should not exceed one third of its income.
• For example: If a church has general funds income of $750,000, the annual mortgage payment should not exceed $250,000. Building-fund monies can be used in the calculation in some instances.
• 75% loan to value ratio- The percentage of the loan to the value of existing buildings, land, and the project being financed by the loan should not exceed 75%. Example- Appraised or "book" value is $2,000,000. That amount, multiplied by 75% suggests a $1,500,00 loan amount.
• The organization must have an operating history of more than three years.
• We have a minimum loan requirement.
• A fixed-price construction contract is required on new building projects.

Church Financial Statements

We understand that most churches do not have accountant prepared financial statements and in most cases we are able to work with a church that has internally prepared financial statements. There are cases where a church will need have their financial statements prepared by an accountant in conjunction with closing the church loan. This situation can arise when the church loan is very large or we do not understand the internally prepared statements.

If the church needs to have financial statements prepared by an accountant we can provide referrals to a number of accountants we have worked with in the past. We can not guarantee the work of third parties, and it is the responsibility of the church to negotiate a fair price although we can give some guidance. We do not receive any compensation from accountants that you choose to work with. You are welcome to use an accountant that you are familiar with.

When selecting an accountant we recommend that you ask them the following questions:

1. How many churches have they worked with in the past?
2. Are they familiar with accounting practices for non profit organizations?

Financing For Churches

Financing For Churches

Why is it that Churches have trouble finding financing for their projects? And I am not just talking about new Churches, but well established churches with good income and great attendance. I have been involved in the field of finance for 10 years and for most of that time I have been helping Churches find financing that meets their needs. This Blog is specifically for giving and sharing of ideas that may help Churches get financing.

I will start out by explaining once and for all why Church lending is such a specialized type of lending and why many banks and other lenders will not touch church loans. They are generally single use properties, not personally guaranteed, and they do not file tax returns. To compound the problem most churches do not keep very detailed records.

What can Churches do that will make them more attractive to get a loan?
First, they can hire a good accountant to at least review their financials and make sure they are easy to understand. Secondly, they can write down a good explanation of what they are attempting to accomplish and how it will benefit the church and explain how the church will plan to pay for this project.
If the church will need to increase its revenue to be able to afford the construction of a new building, how will it increase its revenue?

Will the Church add more members or are they starting a building campaign? Lastly, you need to have the right documentation. It is key to gather the following documents and have them ready to submit with the loan request: Bio on the Head Pastor, History of the Church, 3 years income and expense statements and balance sheets, description of the transaction, cost breakdown if you are doing a construction or renovation project and pictures of the property.

Once you are prepared, then what?  Who will lend you the money and under what terms? This is the challenge and one way to find out is to complete an application that does not cost anything but will give you advice specific to your transaction by church loan experts. I recommend ChurchCa$h Consulting for many reasons, they know what they are doing and they give honest answers quickly and lastly because it is where I work

What if your Church's loan request is decined?

 When a church receives a decline they are often given very little information as to why they did not qualify. They might hear something like: “Your debt service coverage was below our minimum requirement.” Or “The amount you are looking to borrow is more than your debt service can cover at a comfortable level.” To many people this sounds like garbled nonsense. What you don’t generally hear is what you need to do to be approved.

Ask specific questions about what the church can do to qualify for the loan. An analyst should be able to tell you how far the church is from being approved for the requested loan amount. You also want to know how much money the church can qualify for today. Some analysts are unwilling or unable to answer these questions because they do not know how to underwrite a church loan; they simply take your information and pass it off to an analyst that does the work.

Often times you will hear from an analyst that you simply need to increase your income by X to qualify for the loan. Increasing income can often times be more difficult than decreasing expenses. So it is better to express things in relative terms: “Your church needs to have about $50,000 to service the proposed new debt payment.” In this example, the church can decide if it wants to decrease expenses to make up the shortfall, increase income, or some combination of the two.

I will give you the kind of advice you need to understand exactly where your church is and what needs to be done to get the loan approved. My consultation is free and without obligation.

Even if your bank said no, we still want to look at your loan. Many times we can be more aggressive than a traditional bank and provide you a higher loan amount at better terms than they would have offered. 

So if you or someone you know is looking for a church loan, please contact me today. Don’t forget to ask about our referral program:

Common Questions and Answers

Below are some commonly asked questions. If you have a question or concern that is not addressed here, please click Info Request button.

Is church financing available?

1. How large a down payment is usually needed?
2. What does it take to qualify for church financing?
3. Are there benefits to being pre-qualified by a lender?
4. How is a realistic market value determined?
5. How long can it take to sell a church property?

Is church financing available?
Church financing is a very specialized form of commercial lending.
Because it is so specialized, many financial institutions do not offer financing for churches.
Fortunately, there are some good church lenders including a few commercial banks, credit unions, and other lending sources. 
How large a down payment is usually needed?
Often, potential church buyers are surprised to learn that the down payment percentage needed to finance a church property is usually much higher than to buy residential property. Many times their surprise is quickly followed by disappointment because they don't have enough funds saved for the down payment required by the lender. One of the first steps in preparing to relocate is financial planning. ChurchCa$h Consulting can help your church formulate its relocation plan.

Are there benefits to being pre-qualified by a lender?
There are a number of benefits when a buyer is pre-qualified by a lender before viewing a property and writing a purchase offer. The pre-qualified buyer:

1. is in a favorable negotiating position
2. saves time and effort in viewing only properties they are qualified to buy
3. can prevent the embarrassment of being turned down for a loan
4. avoids placing the sellers' financial security at risk (by needlessly taking the property off the market)
5. can reduce the escrow time because the loan approval process is already in progress.

Buyers who are motivated will do what it takes to put themselves in the most favorable position to acquire a property. All else being equal, a seller will certainly take the offer of a pre-qualified buyer over one that has not been pre-qualified. ChurchCa$h can assist in finding the right lender.

What does it take to qualify for church financing?
Every lender is a little different, but in general a church borrower:
 a) needs to be incorporated
 b) have three years or more of financial statements
 c) have a good down payment
 d) have sufficient income to make the loan payments.

ChurchCa$h can assist you in determining the amount you qualify for.

How is a realistic market value determined?
A key component in marketing a property is having a realistic asking price. Through special training and many years of experience, We can establish a realistic market value for church property. Using an extensive database of comparable church properties, along with construction costs and land values, plus public records, ChurchCa$h  prepares a lengthy report of our opinion of value. On average, our opinion of value is within a very few percentage points of the actual sales price.

How long can it take to sell a church property?
There are many factors that influence the sale of a property -- such as location, price, and building condition. Over the past few years, ChurchCa$h's experience has been that it takes an average of about five months to get a church property under contract and about three more months for escrow to close. 

Is it better to Buy or Build a Church?

Is it better to Buy or Build a Church?
If given the option of buying a building or constructing a new building, which should a church choose?
The answer is more complicated than the question and often depends on the needs of the church, the cost to construct the new building vs. purchasing the existing building, and the future plans of the church.

If the church is able to purchase a building that is existing and it fairly meets the church's current needs and has the ability to meet future needs over the course of the next 5 years then a purchase is probably the right choice. A purchase gives you the ability to know with relative certainty the cost of a project where as construction can often times have unforeseen cost over-runs, time delays and complications.

If the church can not find a suitable building then construction is the only option. If this is the case then remember this simple tip:
Contact ChurchCa$h Consulting to determine what the church will be able to borrow before you work with the architect. This will save time and money.

What exactly is a capital campaign?

What exactly is a capital campaign?
Our goal at ChurchCa$h Consulting is to educate churches and empower them to make wise decisions.
To that end, we provide free information that covers church finance issues.
A capital campaign is a campaign to raise money, usually done for a specific purpose. The purpose can be anything from building a new building to paying down current debt.
There have historically been two ways to handle a capital campaign:
1) Professionally led capital campaign where the church hires an outside professional company to come to the church and provide the experience and leadership to see the campaign through a successful completion. This method can be expensive but churches may enjoy the high level of service.
2) Church led capital campaign where the pastor expresses to the congregation a specific need for money and asks for pledges to be raised over a period of time. This method does not cost anything but it does not tend to have very good results because the church does not know what to do or the process that needs to take place in order to have a successful campaign.
Recently, a new type of capital campaign has been introduced. It is a hybrid of the two methods above. It teaches the leadership how to run their own professional capital campaign and gives them all of the tools and materials that would be used by a professional capital campaign company. This method is a little more work than just bringing in a professional company to run the capital campaign but it is far less expensive and once you have the knowledge and materials about running a capital campaign you may not ever need to higher someone else to do this again.
Contact us for more information...

Do financial statements have to be prepared by an accountant?

Do financial statements have to be prepared by an accountant?
We often hear from churches that they have been told by a bank that they have to submit accountant prepared and even audited financial statements in order for the loan to even be reviewed. Having financial statements prepared by an accountant is time consuming and expensive and frustrating if the lender ends up saying no for something that they could have determined by reviewing the church loan request with internally prepared financial statements.

Generally, if a lender is telling you that your statements have to be prepared by an accountant for them to even look at the loan this is a pretty good sign they do not close a lot of church loans and probably are looking for a polite reason to turn you away.

We take a different approach; we will review your financial statements and tell you how much your church will qualify to borrow. If the statements will not be accepted by underwriting you will be able to determine if it is worth moving forward at that point based on whether we believe we can provide the financing or not. In many cases we do not need financials statements to be prepared by an accountant. If the church is well organized and their financial statements are in order we can generally use internally prepared statements, saving the church time and money.

Bond or Loan? Which should you choose?

                                                                                     

 Should your Church get a Bond or a Church Loan?

When looking to finance a church there are primarily two options available to churches, Church Bonds and Church Loans. This blog will discuss the differences between the two. Most Church Bonds have long term fixed interest rates and are used for the same purposes as a church loan such as purchasing real estate, refinancing a property, building a sanctuary, and renovating a property. Church Bonds generally have a fixed interest rate with no balloon and range in length from 15 years to 30 years. Most Church Bonds do not require personal guarantees.

Before you get all excited and call one of our church loan Analysts about one of our Bond programs you need to understand how this differs from our church loan programs.

Although Bonds have long term fixed interest rates, the fees are much higher. The reason that fees are higher on a bond program is that you have to pay to have the bond underwritten and then you have to pay to have the bonds sold to investors. It is not uncommon for a church to pay upwards of 10% in fees to complete a bond transaction. To make matters worse, most bond companies do not offer guaranteed placement, meaning that it is possible you will incur the fees and they will not sell the bonds or they will come back to the church and ask the church members to purchase the bonds.

If a church has had credit issues or needs creative financing then a bond program may be the only fit but in most cases a church loan is going to be less expensive and quicker to close.

Church Bond paperwork versus church loan paperwork:
A Church Bond tends to have much more stringent guidelines because the bonds are sold to investors. Audited financials and lengthy paperwork are a necessity with this loan. Because of the paperwork and the fact that the Bonds must be sold to investors a bond transaction can take as much as 2 or 3 times longer than a church loan.

In Summary:
In almost all occasions a church loan is better than a Church Bond. church loans generally have fewer fees; have excellent rates and terms and can be closed in a fraction of the time it takes to do a bond offering.
Please call our offices and speak with one of our church loan Analysts to learn more about options available to your church: (718) 857-2067

What you should know before you seek funding

Before you decide on pursuing a loan for your Church or Religious Organization, here are some points to consider:
1. Needs Analysis
2. Count the Cost
3. Beware of the"Fast Food" Mentality
4. Be Aware of the Proper Sequence of Events
5. Understand "Cash Flow"
6. Making it Come Together
7. Choosing a Guide

Needs Analysis:
Such a critical, but often neglected area. You should always be thinking, "The Big Picture."
Let us assist you in considering:

Space Needs- Now and Later

Regulator Requirements by Local Authorities (There are MORE than you think!)

Growth Curves

Ministry and Outreach

Your Vision

Count The Cost:
Common errors and hidden stumbling blocks can slow progress, frustrate and even stop a building, remodeling or relocation project.

You may rely on your ChurchCa$h consultant to guide you through the maze and allow you to benefit from experience gained over twelve years and with hundreds of churches across America.

Beware Of The "Fast Food" Mentality:
Many ministries fall victim to the "We Need It All Now" syndrome.

ChurchCa$h will guide you through the maze of planning a project that compliments, rather than conflicts with, your budget and ministry needs. Scores of thousands of dollars may be saved using wise counsel and taking the time to properly phase your project.

Part of your ChurchCa$h Consultant's service to you is analyzing your growth and borrowing ability prior to your committing funds to outside professionals.

Be Aware Of The Proper Sequence of Events:
All too often ministries needlessly spend untold thousands of dollars for architectural plans which design structures for which the ministry is unable to financially qualify to build.

Your ChurchCa$h consultant will assist you with:
Scheduling each aspect of your project to maximize the use of your funds and minimize wasted time and money.

Reviewing the qualifications of your building, legal or financial professionals to help assure they are capable of doing it right the first time.

Maneuvering through the maze of Federal, State, County or Municipal regulatory requirements which may negatively affect your project and drive up your costs. Among these regulatory requirements are environmental concerns, building codes or other local regulations.

Understand Cash Flow:
Ministries are typically not for profit in more ways than one. Every penny that comes in is spent. While this is great for ministry, it is destructive to a ministry's borrowing potential.
Your ChurchCa$h consultant will walk you through the maze of financial truths. Your borrowing power will be analyzed, strengths and weaknesses discussed and action plans developed to address short and long term needs of the ministry.

Making It Come Together:
Some ministries only want or need assistance here and there. Others depend on a full spectrum of services and guidance from assessing your need to working with local planning departments all the way through the project completion.
ChurchCa$h is ready to serve you in any part of the process... every step of the way.

Choosing A Guide:
So... you've heard "We need to..." and you're ready to get started. Are you ready to make the journey through the maze as painless and smooth as possible? Give us a call today.
Our consultants are ready to help you through the maze associated with financing.

Church Loans and Not- for-Profit Loans:
Church and Non - Profit loans are low document loans.
ChurchCa$h can obtain funding at the lowest interest rates,(depending on individual qualification), five year fixed plus five year fixed rate loan with a 20-year amortization. Any size membership. Construction loans are also available.

ChurchCa$h brings over 12 years experience in church financing.
Our company is based on the belief that our customers' needs are of the utmost importance.
Our entire team is committed to meeting those needs.
As a result, a high percentage of our business is from repeat customers and referrals.
We would welcome the opportunity to earn your trust and deliver you the best service in the industry.

Church Construction Loan to Permanent Loan Program:
Our network lender programs combine the church construction loan and permanent financing of your project. You qualify for the loan once, lock in the permanent rate, sign one set of loan documents and have up to 12 months to complete the construction.

During the construction period, interest is charged only on the funds that have been disbursed. When the project is completed, the permanent loan period begins.

This is a "One Time Close" church construction loan program to finance the construction of a new sanctuary, educational wing, gymnasium, etc. providing both the construction financing and permanent loan all in one closing. This means that you sign only one set of loan documents and do not have to worry about re-qualifying, re-appraisals, additional closing costs or signing additional loan documents.

Unlike a purchase transaction of an existing church, a Construction To Permanent Loan involves determining the value of something that is not yet constructed! To assist the appraiser and the lender in determining the value of the structure after it is built, information must provided as to:

What is going to be built or constructed?

What materials are going to be used?

How much will the material cost?

How much is the actual work going to cost?

How much did the land cost, what is it worth today?

How much will be spent on plans and permits?

You will have another very important item to be concerned with, which is your organizations choice of the general contractor who will be awarded the contract and the actual text of the construction contract.

From the general contractor, the lender will need a resume and a builder's application to be completed along with a credit check. This is for your protection as well as the capital provider's, and ensures that he/she is experienced, has a proven track record, and will be able to perform under the terms of the contract.

In addition to the above, our network lenders will of course need the standard income and credit documentation that is required in any real estate.

CHURCH MORTGAGE LOAN:
This type of loan is used to buy real estate and is always a first mortgage. Your organization may be purchasing land, a larger sanctuary, or even a day care center. Each of these has its own set of lending "rules" that dictate how your church mortgage can be structured.

Our network lenders will consider the property type, your organization's assets, income, and the amount of money you have to put down to determine how much they will lend and at what rate.