The Local Church
You may well find that one or more individuals within your local church community are able to lend money to the church to provide project funding. As with any other financial arrangement, it is important to set down on paper your understanding of the agreement, preferably with some appropriate legal assistance.
The National Church
Some denominations have money available for loan; keeping you borrowing ‘within the family’ in this way is often much cheaper than arranging a loan with an external lender. Once again, ensure you are clear about the terms of the agreement.
Raising a mortgage from an external lender can be a lengthy and complex process. Church borrowing is a tiny market compared with the residential mortgages most of us have on our houses. Because of this it can be difficult to find lenders who understand churches, and professionals who can give appropriate advice. Remember also that a church will enjoy none of the protection an individual enjoys under consumer legislation. This is therefore one area where it is hugely worthwhile to take some specialist advice.
Simon Shefford is one such mortgage specialist who, with Giles Arnold of Church Growth Trust, has written a very helpful introduction to the area; this ‘white paper’ is available from our Downloads section, and both Simon and Giles can be contacted through the ‘Project Help’ form in the sidebar to the right.
Some key themes from the white paper are:
Credibility – lenders need to be satisfied that you are serious and responsible. They will therefore look at your ‘business as usual’ finance, and will need to see a competent business plan.
Vision – be clear about why you are doing what you are doing.
Security of the loan – the lender will take a view on the value of the completed church. Note there is another important difference compared with the residential market, in that a newly built church is invariably worth less than the combined cost of land and construction.
Affordability – a lender will quite rightly be looking to see that the church can afford the repayments on any loan that is offered.
Terms – a discussion of the typical terms of a loan, and what to look out for.