The Script: Volume 1

The time is right for your church’s expansion plans right? Borrowing rates are low, material costs are down, construction labor is low, and your church is growing. Be careful, banks are making it more difficult to secure a loan. Lending standards have tightened and churches need to take their time and to do their homework with lenders before making any decision about expanding. It may require the church to increase the amount raised during a capital campaign. It really is a great time to build and most likely when your project is finished the economy will be on the rebound and more of your parishioners will be back at work.

Here are two issues you need to consider before attempting to secure a loan. A church, which is a 501(c) 3 organization, is tax exempt and does not have to file tax returns. It is difficult for a church to verify its income unless a church uses ‘Generally Accepted Accounting Principals’ which involves balance sheets and such. If ‘Generally Accepted Accounting Principals’ aren’t used at a church banks may make it more difficult to secure a loan. Secondly, lending institutions recognize even though membership is growing at your church, tithing may be down because of the economy.

Surprisingly, there are multitudes of lending sources that are not associated with the traditional banking system. These sources are in the form of loans from members of the church, Pastoral or Religious Retirement Funds, and Faith Based Credit Unions. In fact a new faith based credit union will be opening in the area with the next 60 days. Access to most of these sources are not always transparent; this is one of the main reasons that churches often go to the local bank for lending needs.

The benefits of these alternative types of financing are not obvious to the uninformed. Many of the benefits are found in how a church is determined to be a ‘good risk’ and lack of restrictive covenants in the loan documents. Another benefit of using the faith based sources is that the payments made on the loan and the interest paid is funneled back in the community to expand the work and missions of the church or affiliated organization.

Lorenz Architecture is the only architecture firm who is a member of the NACDB (National Association of Church Design Builders) in the area. Being a member of the NACDB provides limitless resources such as financing sources, master planning and programming information, vendors, and so on.

We plan on issuing the Script quarterly in an effort to help churches fulfill God’s purpose. In our next issues we will discuss master planning and programming in an effort to explain the benefits of theses processes before a congregation develops any sort of building plans.