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