Church loan

building, church, trees-48595.jpg

church loan
Posted by: Craig Henson Aug 24 2004, 12:19 PM
I am the pastor of our church in Los Angeles. We would like to borrow money against our property to do some capital improvements. Our property is free and clear and worth approximately 3 million dollars. We are most interested in an equity line of credit. We own land that our church sits on. We also own a house that just appraised at $650,000.00, but we have found out that corporations cannot get a home equity line of credit.
Do you have any advice for us? One bank has already denied our application saying we lacked sufficient cash flow.
Any help is greatly appreciated.

Posted by: loanuniverse Aug 24 2004, 02:12 PM

I have underwritten three loans to non-profit religious organizations in my banking career. In my limited experience, I remember two occasions where the purpose of the loans was to provide financing for capital improvements. The last loan in particular is still fresh in my mind because I wrote the analysis less than two years ago. The borrower was a Temple and the loan was going to finance renovations to the synagogue.

The problem with lending to houses of worship is that the repayment is coming from the congregation dues, and that congregation can move to another church easily. In addition, Banks would like to avoid having to foreclose on a house of worship, that would be very bad for public relations.

One bank already told you that your cash flow is not sufficient, so I am going to assume that their calculations are correct. If I remember correctly, both of the loans that I did for capital improvements were supported by fundraising campaigns for those capital improvements. That is, the credit analysis was able to identify a source of repayment that was outside the “general fund” and be able to count on that inflow to repay the loan.

Depending on your denomination and affiliations, you might be able to get help and guidance from other pastors that have faced a similar situation. If you can convince your congregation of the need to do this particular fundraising for the capital improvements, and can get them to pledge “even if it is a small amount over a few years” You might be able to improve that debt service coverage calculation.

Of course if your church does not have a history of “fundraising campaigns”, a good credit analyst would question how much of those pledges you will be able to collect, but that is another story.

I also think that a line of credit might not be the best way to approach it. You probably want to get some kind of committee of members involved in defining exactly what the improvements should be and get a construction/renovation budget setup. Once you have that, the people involved in the process can help you make the case to the congregation as a whole to get the fundraising campaign started. I get the idea that you are initially looking for an open ended line of credit, having something more concrete will help the lenders understand it better.

Good luck
Posted by: lotusraee Aug 24 2004, 04:02 PM
Maybe look into to refinancing residential property depending upon how much cash is needed. This maybe an option.
Posted by: Commercial Lender Aug 26 2004, 06:17 PM
I may be able to do something for you. I would def need some more details. Either PM me or call me at the number listed in my signature. Thanks. Naj
Posted by: Capitalaccess Aug 30 2004, 07:20 PM

We are new to this board. If you still need assistance with financing your church, I am available to help. We are specialty commercial lending brokers that understand the particulars for church finance. You may call or email for additional information.
Author: Commercial Loan Underwriter