One of the most difficult types of transactions to finance is the completion of a church construction project that has been started but has run out of money. Whether the church likes it or not the underwriter perceives this as being a product of poor planning and a risk to happen again. So what does a church do? The church can not very well just walk away from the project, there must be some way to fix the problem.
We have a program that is specifically designed to solve this issue, even if the church has credit issues. The program has a 25 year amortization and generally a 3, 5 or 9 year fixed rate depending on the situation. This program uses a debt service coverage approach to calculate the amount of the church loan and is limited to 4 times the churches gross income but it can be mixed with our "Stewardship Loan" program for those churches that need a more liberal loan amount.
It goes without saying that the best place to go for a loan to complete the church construction project is the lender that is currently holding the churches note but if that avenue has already been exhausted by the church then our program may be a good fit.
When applying for a loan to complete the church construction it is important to know how much it is going to cost to complete the project from this point to the end and be willing to discuss ways the church can limit the chances of this happening again. It is also important to disclose any payment problems with the current loan or liens against the church property from unpaid contractors. Finally, you should be ready to offer suggestions to help cut the cost of the church project by reducing either the scope or size if necessary or changing materials or FF&E (furniture fixtures and equipment) which may be leased as opposed to purchased if necessary.
The end goal should be to complete the construction project for the church with as little pain and expense as possible to the church and finish with a project that the church can be proud of and a loan the church can afford. For more tips or to apply for a loan online visit http://www.churchloans.net
http://www.church-financing.com
Monday, October 16, 2006
Saturday, July 29, 2006
Church Bonds Versus Church Loans
I am often asked to compare a church bond to a traditional loan for a church. I will start out by explaining how bonds work and how their fees differ from a traditional loan and the advantages and disadvantages of each.
Church bonds are generally a fixed interest rate debt instrument used to facilitate the financing of a real estate transaction for any purpose from construction, refinance, purchase and rehab. The bonds are sold to investors looking for a fixed return for a specified period of time. Church bonds generally have a fixed interest rate for the entire term and do not generally have a pre-payment penalty. They do not require personal guarantees and the money can be used for almost any purpose.
Before you get excited and call me for one of our bond programs you need to understand how this differs from a loan.
The big claim to fame that most bond companies try to tell you is that you can not get a long term fixed rate LOAN with no balloon. This may be true when you are talking about what most banks offer but not all Church financing programs are the same. We offer both fully fixed term loans and bonds. The rates are about the same but the fees for a bond are much higher and the time to close is generally much longer for a bond. So why choose a bond over a loan? A bond is a good instrument to use in a couple of situations. Provided you have audited financials a bond can be more creative than a loan in certain situations. For instance there are occasions where a bond will use the promise of future pledges to qualify a church for a loan today. The bond has the flexibilty to defer part of that payment to a later date when those pledges will be recieved. Loans have a great deal of difficulty being this creative. Bonds may be more relaxed regarding credit and still give you good rates and terms. We have a bond and loan program for churches that have had issues with credit in the past. The difference is that with the bond program you can still get long term fixed rates with no balloon with not so great credit; the loan only has fixed rates for up to 5 years and the rates are higher. Again, the bond is going to cost you more in points but here is a situation where a bond may be better than a loan.
Paperwork for a bond versus a loan:
Church bonds generally require that you have audited financials and even for our program you have to have them for at least the most recent year and sometimes for the prior 3 years. For our loan programs it is almost never required to have audited financials and sometimes we do not even need an appraisal for our loan program.
Why is there so much difference between a bond and a loan?
A bond is an investment that is sold to people like you and me and as such is generally regulated by the Securities and Exchange Commission (SEC) and as such bonds have rules and regulations they must adhear to on the federal and the state level. A loan however is not regulated by the SEC and the underwriter has flexibilty determined by the company he/she works for and not by the SEC.
To Summarize:
There are few instances when financing churches with a bond is better than a loan based on the costs associated with obtaining a bond, the general time it takes to fund as well as the need for audited financials but there are some.
If you are unsure of which way you should go, apply online at www.churchloans.info or www.church-financing.com and one of our consultants will call you back to discuss your options. Also, you may call toll free and speak directly with a consultant at 800-710-6762
Sunday, July 09, 2006
100% Loan Program for Churches
We are testing our new "Easy 100" program to see how the market likes it and so far it has been a huge success. We have received so many calls about the program that I thought it was important to take a moment to address a couple of issues. First, mortgage brokers can not earn normal points on this loan, the only fee they can earn is the 1/2 point referral fee upon closing of the loan. This limitation is set because we do not want a lot of these loans. This is a riskier type of loan and needs to be limited to well qualified churches. There are few limitations to mortgage brokers under our other programs but this one is firm.
People have been calling and applying for this loan left and right and I need to clarify a couple of items. First, this program will allow a church to qualify for up to 3 times its gross qualifying income as a loan amount. The maximum loan to value is 70% of the appraised value for purchases and 65% for construction. So for example, if your church brings in $235,000 per year of qualifying income and the property you are buying is worth $1,000,000 and the purchase price is $700,000 you can apply for the 100% loan program and have a very good shot of being approved; provided you meet the other guidelines.
So if your church has been in business for 5 years or more and you have found a property that you want to buy but do not have the money saved up for the down payment but are getting a good deal on the property, this program may be your answer.
Go to http://www.churchloans.info and http://www.church-financing.com for more details and to apply.
People have been calling and applying for this loan left and right and I need to clarify a couple of items. First, this program will allow a church to qualify for up to 3 times its gross qualifying income as a loan amount. The maximum loan to value is 70% of the appraised value for purchases and 65% for construction. So for example, if your church brings in $235,000 per year of qualifying income and the property you are buying is worth $1,000,000 and the purchase price is $700,000 you can apply for the 100% loan program and have a very good shot of being approved; provided you meet the other guidelines.
So if your church has been in business for 5 years or more and you have found a property that you want to buy but do not have the money saved up for the down payment but are getting a good deal on the property, this program may be your answer.
Go to http://www.churchloans.info and http://www.church-financing.com for more details and to apply.
Tuesday, June 06, 2006
Sunday, June 04, 2006
Church Foreclosed on by Bank in Pennsylvania
Late one Thursday afternoon I received a call from a church in Pennsylvania; Bishop "Jones", name changed to protect identity, was on the phone. I could tell from his voice that he was scared, his church was in trouble. They had recently been foreclosed on (meaning they already lost the court case and the property was in the hands of the bank.). Luckily in P.A. as in most states, the church has a period of time after the foreclosure process to buy back the property, we had 90 days. This is called the redemption period.
I had seen this situation before and it is scary. The most difficult type of loan to do is a church loan that is in trouble and behind on its payments. This one was worse than that, they had already lost the property. There was no reason for the bank to negotiate with us, they had already won the court case, if the church could refinance the loan then great, they get paid off in full. If the church can't pay them off, they get the building in 90 days, no questions asked.
Bishop Jones voice is strong with Faith and he speaks of the drop in income for the church over the past couple of years and how they had anticipated refinancing with someone else to be able to make the mortgage payment but that fell through. Before the church new it, they were 3 months behind and the bank would not refinance them to bring their loan current. He told me about the hours of prayer he and his members spend. He is anxious to hear if I can help.
I tell him that their is a good chance I can do it and I send him the application and short list of items to gather for me. Bishop Jones confidently tells me he will have the items back to me the next day. True to his word, they are.
I look over the financials and quickly realize that they can afford the payment with some minor adjustments and an interest only loan. I issue a contract the next day with an interest only payment for 3 years and enough money to cover all closing costs and buy the church back from the bank.
We order the appraisal and the other due diligence items and wait with our fingers crossed. The underwriter has only approved a 65% Loan to value on this loan based on the churches payment history. I new we were tight. The day the appraisal was due back the Bishop called me a couple of times to see if I had heard anything. Both times I told him no but that I hoped it would be anytime now and I would call him when I did.
The next day I got the call. Bad news, the appraisal was short, the church had no cash. We only had one option: The underwriter had to increase the loan amount. I called Steve and told him, "Steve, we are a little short on the appraisal for Bishop Jones." He new what I was going to ask so I didn't even have to say it. "How short are you" he asked. "I need 5%"
I know this probably does not sound like a lot but in a situation like this even 1% is tough to get out of an underwriter. They have drawn a line in the sand and they have said I will give you 65% and that is it.
I pleaded my case, I reiterated the strong points and downplayed the bad. He agreed, and he will not be disapointed. In 10 years I have never had a church foreclosed on and this is not going to be the first.
I called Bishop Jones "The church is going to fine." I said. He thanked God and I thanked him for his business and giving me the opportunity to save an important part of the community and of so many peoples lives.
We closed the loan a couple of weeks later and the church has made every payment ontime!
That is what I call success!
For details on our underwriting guidlines you can visit www.churchloans.info/underwriting
I had seen this situation before and it is scary. The most difficult type of loan to do is a church loan that is in trouble and behind on its payments. This one was worse than that, they had already lost the property. There was no reason for the bank to negotiate with us, they had already won the court case, if the church could refinance the loan then great, they get paid off in full. If the church can't pay them off, they get the building in 90 days, no questions asked.
Bishop Jones voice is strong with Faith and he speaks of the drop in income for the church over the past couple of years and how they had anticipated refinancing with someone else to be able to make the mortgage payment but that fell through. Before the church new it, they were 3 months behind and the bank would not refinance them to bring their loan current. He told me about the hours of prayer he and his members spend. He is anxious to hear if I can help.
I tell him that their is a good chance I can do it and I send him the application and short list of items to gather for me. Bishop Jones confidently tells me he will have the items back to me the next day. True to his word, they are.
I look over the financials and quickly realize that they can afford the payment with some minor adjustments and an interest only loan. I issue a contract the next day with an interest only payment for 3 years and enough money to cover all closing costs and buy the church back from the bank.
We order the appraisal and the other due diligence items and wait with our fingers crossed. The underwriter has only approved a 65% Loan to value on this loan based on the churches payment history. I new we were tight. The day the appraisal was due back the Bishop called me a couple of times to see if I had heard anything. Both times I told him no but that I hoped it would be anytime now and I would call him when I did.
The next day I got the call. Bad news, the appraisal was short, the church had no cash. We only had one option: The underwriter had to increase the loan amount. I called Steve and told him, "Steve, we are a little short on the appraisal for Bishop Jones." He new what I was going to ask so I didn't even have to say it. "How short are you" he asked. "I need 5%"
I know this probably does not sound like a lot but in a situation like this even 1% is tough to get out of an underwriter. They have drawn a line in the sand and they have said I will give you 65% and that is it.
I pleaded my case, I reiterated the strong points and downplayed the bad. He agreed, and he will not be disapointed. In 10 years I have never had a church foreclosed on and this is not going to be the first.
I called Bishop Jones "The church is going to fine." I said. He thanked God and I thanked him for his business and giving me the opportunity to save an important part of the community and of so many peoples lives.
We closed the loan a couple of weeks later and the church has made every payment ontime!
That is what I call success!
For details on our underwriting guidlines you can visit www.churchloans.info/underwriting
Friday, July 29, 2005
Church construction
I just completed 2 very difficult church construction projects in California. Both of them were for churches that had started construction projects but were not able to get financing to complete them. Through some negotiating with the underwriter and creative structure I am happy say I was able to get them both funded.
Friday, March 04, 2005
Financing For Churches
Why is it that Churches have trouble finding financing for their projects? And I am not just talking about new Churches, but well established churches with good income and great attendance. I have been involved in the field of finance for 10 years and for most of that time I have been helping Churches find financing that meets their needs. This Blog is specifically for giving and sharing of ideas that may help Churches get financing.
I will start out by explaining once and for all why Church lending is such a specialized type of lending and why many banks and other lenders will not touch church loans. They are generally single use properties, not personally guaranteed, and they do not file tax returns. To compound the problem most churches do not keep very detailed records.
What can Churches do that will make them more attractive to get a loan?
First, they can hire a good accountant to atleast review their financials and make sure they are easy to understand. Secondly, they can write down a good explanation of what they are attempting to accomplish and how it will benefit the church and explain how the church will plan to pay for this project. If the church will need to increase its revenue to be able to afford the construction of a new building, how will it increase its revenue? Will the Church add more members or are they starting a building campaing? Lastly, you need to have the right documentation. It is key to gather the following documents and have them ready to submit with the loan request: Bio on the Head Pastor, History of the Church, 3 years income and expense statements and balance sheets, description of the transaction, cost breakdown if you are doing a construction or renovation project, picture of the property, and Religious Organization Information Sheet (Click Here to get).
Once you are prepared, then what, who will lend you the money and under what terms? This is the challenge and one way to find out is to complete an application that does not cost anything but will give you advice specific to your transaction by church loan experts. I recommend Carteret Commercial Mortagage (Click Here) for many reasons, they know what they are doing and they give honest anwers quickly and lastly because it is where I work.
Please post your comments about financing stories that have been tough or easy, problems you have had and ways you have solved your problems. If you have specific questions please also post. Thanks, John Berardino 800-710-6762 xt.1
I will start out by explaining once and for all why Church lending is such a specialized type of lending and why many banks and other lenders will not touch church loans. They are generally single use properties, not personally guaranteed, and they do not file tax returns. To compound the problem most churches do not keep very detailed records.
What can Churches do that will make them more attractive to get a loan?
First, they can hire a good accountant to atleast review their financials and make sure they are easy to understand. Secondly, they can write down a good explanation of what they are attempting to accomplish and how it will benefit the church and explain how the church will plan to pay for this project. If the church will need to increase its revenue to be able to afford the construction of a new building, how will it increase its revenue? Will the Church add more members or are they starting a building campaing? Lastly, you need to have the right documentation. It is key to gather the following documents and have them ready to submit with the loan request: Bio on the Head Pastor, History of the Church, 3 years income and expense statements and balance sheets, description of the transaction, cost breakdown if you are doing a construction or renovation project, picture of the property, and Religious Organization Information Sheet (Click Here to get).
Once you are prepared, then what, who will lend you the money and under what terms? This is the challenge and one way to find out is to complete an application that does not cost anything but will give you advice specific to your transaction by church loan experts. I recommend Carteret Commercial Mortagage (Click Here) for many reasons, they know what they are doing and they give honest anwers quickly and lastly because it is where I work.
Please post your comments about financing stories that have been tough or easy, problems you have had and ways you have solved your problems. If you have specific questions please also post. Thanks, John Berardino 800-710-6762 xt.1
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