The Lending Landscape : Construction Financing
Collaboration is key
One of the most challenging aspects of growth in a church can be the preparation and coordination of balancing space needs with financial means .
After all , the physical building can mean so much to your church family . You want to have a certain feeling when you walk in the building . You want the building to project the heart of your church and meet the physical demands of a growing ministry at the same time — all within a budget that is reasonable . Building a new worship center requires expertise in many fields to come together . A large building project has many moving parts , and between an architect , a contractor , a lender , a campaign manager , and your leadership team , everyone has an important part to play . Preparing for that — and managing through it , often for well over a year — can take hours of a church building committee ’ s time , and in many cases , the “ point person ” on the project becomes overburdened with a role he or she might not be prepared to embark upon . Clearly , the “ building ” part of this process is only one leg of the journey to a new facility . Who will pay for this dream of ours ? Do we need to borrow to make this happen ? How much can we raise from our church family ? How does this all fit into our church vision and mission ?
Understanding the capital stack projection These questions often require your team to develop a strategy that involves a “ capital stack ” projection . Think of it as a pyramid that starts with cash on hand , then fundraising , and finally borrowing . This capital stack can help you see the vision you have for your project come to fruition . It can also help your congregation have buy-in and confidence in your project completion . If that all sounds overwhelming and exhausting , you are not alone . Without a proper team in place , many church projects are approached with a very fragmented system that has each of the important components of your project operating independently of each other .
• The architect draws the plans based on your dreams and needs for the space .
• The capital campaign company works to raise funds for your church without knowing what the cost of the building will truly be or if there is a need for financing .
• The bank — often brought in last — provides a loan offer that might or might not be what you need to achieve the full funding of your church project .
There are many opportunities for failure in this model — too many holes in the process that could leave your church stuck waiting for funding or even divide your church family because of lack of progress .
Financing should never be your last step The earlier you speak with a lender , the better off you are . You need to choose people who understand church lending and want to work with your organization . It ’ s best for your church to be prepared to present your financial information to your congregation as well as to potential donors and lenders to get your project fully funded . Some questions you might have as you look toward the future of your church construction project :
• Do we have someone on our team with the right skills to prepare us for the next step , financially ?
• Who is going to make sure our project is financially viable ?
• Who will speak to the bank if a loan is needed ?
• Who will have the best interest of our church in mind as we negotiate our loan terms ?
• What banks even work with churches ?
It might be wise to engage a professional to assist you in getting financing for your project to handle these questions . This is not a mortgage broker , but rather a true financial consultant who helps your church balance the needs of the church with the demands of a construction project . This consultant should be someone who can lead the team of experts you need to make a church construction project successful , with the church ’ s best interests as the priority . This consultant will work closely throughout the entire project with the rest of your professional team — meaning the architect , your general contractor , your capital campaign manager , and your financial consultant / lender are all on the same page the entire time .
With some careful planning and the right financial consultant , your church ’ s future goals can be well within reach .
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