Before applying for a church loan, it’s important to determine your church’s amount of net income. Net income is the amount of money left over in the church’s bank account after deducted expenses. The loan’s new monthly payment can only be a certain percentage of your net income, but every lender has its requirements. An ideal percentage would be 42% of your annual net income. Once you have calculated your net income, determine how much of your annual net income you need for the loan.
Buying an existing asset
Using a Church loan to buy an established asset can be an attractive option for some churches. However, unlike traditional commercial property, church properties are more difficult to sell, making it more difficult to secure financing from a bank.
A church loan does not look at the individual’s income or debt, so it is not the same as a personal mortgage. It is a bit like a commercial property loan, and the church is not required to provide personal financial information. This is a huge benefit for a church because the loan can be used for business purposes and not for personal use. You should be able to justify why you need the money and present a comprehensive list of assets and debts.
Refinancing an existing asset
When refinancing an existing asset with a church loan, there are several factors to consider. First, a church is different from a conventional business, and the lending process is more complex. Many lenders have a negative perception of religious organizations, so they avoid these loans. A community bank may be a better option, as these institutions have less stringent regulations than mega-banks. Ask the lender about their experience with financing churches.
Buying a new building
Using a church loan to purchase a new building is an excellent option for many church groups. Not only can these loans help you finance new construction, but they also come with low monthly payments and lower interest rates. However, you should still make sure that you have adequate documentation to support your financial status and the need for the building.
If you are planning on purchasing a church building, it is important to determine whether you are eligible for a church loan. Church properties can be refinanced for many of the same reasons you would purchase a home. You can use the funds to renovate, update and make other improvements. Using a church loan to purchase a new building is an excellent option for churches with a shaky credit rating.
