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Financial Hurdles
We have as much work with churches and schools trying to secure property
or relocate as we have had at any time in the last fifteen years. The
economic slowdown has resulted in some good buys on land, and the low
interest rates are generating activity. However, the economic slowdown
has impacted contributions and capital campaigns for some congregations,
and for those churches their answer is to be conservative in their building
or expansion programs.
Another significant change over the last year has been the slowdown
of some commercial banks and their tightening of credit. Two major banks
who previously were extremely aggressive in funding church loans have
tightened lending to churches. Even churches with extraordinary equity
in their current facility seeking only 60% loan-to-value loans, (i.e.,
they have a 40% equity) and, with only 25% of their monthly contributions
being paid toward indebtedness, are being turned down for loans. It is
understandable for banks to tighten their lending during an economic
slowdown. However, we have been successful in getting loans for these
churches, but it has not been at the usual banks. As always, we have
had to work very diligently and creatively to find funding for churches.
Funding continues to be a major hurdle for churches
and schools. Overcoming that hurdle requires proper financial records,
establishing clear internal
budget limitations, and working with a lender who will give the borrower
a decisive preliminary commitment before the church needs to borrow money.
The most common predicament for churches is putting together a building
program or acquisition and later finding out the church cannot borrow
the necessary funds for their project. Money spent on architectural plans
worth thousands and thousands of dollars are sitting on shelves at churches
because no one secured a preliminary loan commitment and established
a workable expansion or relocation budget. Spending the money on plans
that cannot be used produces distrust in church leadership. The principle
of “Counting the Cost” is a universal concept.
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