I am an Elder in a church in Denver, Co. We're looking to borrow around 100,000.00. The property appraised for 1,200,000.00 a year ago and we have a first of 300,000. We want the money for operational expenses and some property improvements. We are most interested in an equity line of credit but are open to all options. The cash flow is not the greatest.
Do you have any advice for us?

Todd

Todd:

There are a couple of things that worry me about your situation.

First, you mention that you are looking for money for operational expenses. What exactly do you mean? The first thing that crosses the mind of a lender when he reads that is that the church does not have enough money to cover its ongoing expenses {utilities, clergy and staff salaries, debt service, etc} and that you need to dip into the equity to make things work.

The other worrisome statement is that the cash flow is not the greatest. It comes down to how is it that the church is going to pay for the loan.

If the property is appraised at $1,200,000 and all you are looking for is $100,000, you are going to get a loan somewhere. I would not worry about that. Someone will lend the money because the cushion is there. However, you want a lender that is only looking at making interest income from the loan and that is not looking to take over the property.

My experience is limited with these types of loans. The couple of times that we have done something similar, the loan has been structured so that the repayment comes from a special campaign amongst the members of the congregation.

Let me give you an example. Lets say that you were looking to build a classroom to teach the kids in the congregation and that you have a rough estimate that it will cost $100,000 to do. The pastor and the elders would make the case to the congregation, and will get them to pledge a similar amount over the next two years just for this purpose. Armed with this list you could go to a bank and say something like “I know that our operating statements for the last years do not show that the money is there to repay this additional $100,000 loan, but we have gone to our members and we got them to commit $X amount of money, which we will gladly keep in a restricted account on your bank so that the funds are there to repay this loan”

I think that in church lingo they call that a “capital campaign”.

That is just an idea off the top of my head………

We offer a broad variety of properties loans including:
Multi-use properties, Offices, Multi-Family/Apartments (5 or more units), Medical/Dental Offices, Surgical Centers, Retail Shopping Centers, Office/Warehouse, Light Manufacturing, Heavy Manufacturing, Industrial, Self-Storage Facilities, Single-Tenant Buildings, New Construction, Condo Conversion, Hotels/Motels: Flagged & Unflagged
Funeral Homes, Veterinary Clinics, Auto Dealerships, Restaurants, Assisted Living Centers, Day Care Centers,
Churches &Private Schools, Car Wash Facilities, Health Clubs, Grocery/Market, Auto Repair, C-Stores/Gas Stations, Golf Courses & Marinas etc…


Even Church.. Is your church a 501 c 3 corporation? Does it have a steeple?
Sincerely,
John Quebedeaux