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First Steps - Church Financing

Author: BillTravis Total views: 5 Word Count: 731

The purchase of a new church building is the largest financial transaction most church members have ever been involved in. The process thus results often times in intimidating not only the congregation but especially the committee members.

Choosing a team is an important task that should be done as soon as you are seriously considering a change. Having people that know their way around the process will make the task much easier. Let's put it this way, if you were having chest pains, classic heart attack symptoms, you would likely want to see a doctor quickly, right? The closest doctor is a podiatrist so that is where you would head, right? Wrong! Well, why not, he's a doctor. No, you want a specialist who understands the heart well, who works with heart patients everyday. Same is true when you are planning to move your church, find church professionals that know their way around the process, that go through it several times each year, not once every 30 or 40 years.

When I meet with the church leadership for the first time I almost always suggest that they get a church friendly lender on board in the very early stages. Here's why. When you start shopping for land to build on or an existing church building you need to have a good understanding of what you can spend. By getting the banker on your team early you will save yourself a lot of time and put yourself in position to get the deals when they are available.

Money talks in real estate transactions and most churches have their cash tied up in their current building. If you plan to move in the next 24 to 36 months you need to get your building on the market now. Get the building sold, don't worry about making your church homeless, lease back arrangements can be made to make the transition to your new church home go smoothly.

Don't make the mistake I see so many churches make; one mention of moving and everyone in the church is out shopping before you even have your budget worked out. Once you have made the decision to move, get a commitment as to how much debt you can carry and get your cash in your hand. These two moves will put you in a position to grab the deals when they arrive.

Most lenders do not understand "Church"; they can't look at you as a "personal account" so you fall under the commercial lending area. Most commercial concerns make a profit. Most churches don't. Lenders almost never foreclose on churches (bad public relations to be the bank that closed the church) so they have to qualify churches differently than most other commercial accounts. In my experience you are light years ahead of the game by working with lenders that understand church, and there are many that do. As mentioned above, it's best to deal with church professionals.

I suggest that you speak with several church friendly lenders to determine with whom you can gain a comfort level that you could work with them. This is a relationship that will be with you for a long time, it's worth putting in some work to make the right choice.

Now you have narrowed the field to a small number of lenders that fit you, you are ready to begin the application process. In this process you will learn from the lenders how much they can loan you. That information plus the equity and any campaign funds you have collected will allow you to make offers in confidence. That confidence is important to the sellers you will be working with.

In most cases the lender will want you to have 25% - 35% equity in the new property. This is just a guide and many lenders are already on the high end of this scale. Most churches will have to run a capital campaign to raise additional cash. Some will do it themselves and others will use professionals. Many lenders prefer the professional fund raisers because they raise more and collections typically run higher. We will talk about this topic in a future article.

In summary, pray, plan every move well with the help of church professionals that have successfully completed church projects and can partner with you for a successful relocation for your church. Next time we will discuss some of the financial options available for churches today.

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About the Author

Author Bill Travis can asess you with your help churches avoid pitfalls. Pastorcast can be heard live on the second Wednesday of the month at 10:00 a.m. CT.

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