Sometimes, churches might need to expand their existing facility or move to a bigger, better building. It could be growth or their congregation that propels a need to move to a building, or maybe it’s just that time of the year, which calls for repairs and renovation of the existing facility. All these require funds. 

Churches need loans to fund their expansion or reconstruction projects. They might consider taking up a new loan or just deciding to refinance old debt to free up some cash.

How Is Church Lending Different from Traditional Loans?

Churches often are unsure where to start, and commercial lending can be tricky to wrap your head around. Before we talk about lenders and how to select the best lender for church mortgage, it is essential to understand a few things. 

When you’re taking a church loan, the borrowing potential for the church is evaluated differently from that of an individual borrower. If you’re considering a church mortgage, the lender will want to know if the property will generate enough revenue to cover the debt.

Sure, the church is a commercial enterprise, and a lot of lenders do commercial lending from banks to private lenders to credit unions, it is crucial to understand that your church is not a business. It may not be a feasible idea to go with any lender that has experience in commercial lending. Keep these things in your mind if looking around for lenders.

Find a Lender That Shares Your Vision and Understands Your Goals

You don’t need any commercial lender but someone who understands ministries and is committed to serving churches. They are familiar with the unique needs of the churches and have solutions to meet them. The best bet is to choose a lender that does church lending.

Lender Should Share Your Values

Banks make money off the interest that borrowers pay. Although it is not vital to know, commercial lenders could use that money to help other businesses that stand to counter yours. Church mortgage lenders, however, often use the proceeds from interest to fund other churches and grow the community.

Documentation Needed

Even though different lenders approach things differently, keep some documents handy.

Weekly Attendance– This could include details like membership details, baptism, etc. This will serve to tell the lender what’s going on at your church and the growth. 

A business plan is not a detailed plan but just a brief about what your ministry is about, your church, its growth plans, etc. Don’t forget to include an action plan about how you intend to use the loan amount and if you plan to hire additional staff.

Property Value – Your lender will want to know the valuation of the property, even if it’s a rough estimate. It will include details like your share of equity, your building, any other assets owned by the ministry, etc.

This will help the lender understand your church better and its unique needs. You can identify if the lender is capable of serving you and your church needs. It can be the difference between just another financial transaction and another step to grow your ministry and take it higher.