Prior to starting the loan application process, it is important for pastors and church boards to understand the factors considered by lenders when evaluating you for a church loan. Although specific underwriting criteria vary, most lenders evaluate church borrowers in three broad areas: character, cash flow, and collateral.
Character
Most lenders place considerable emphasis on assessing the overall character of the borrower. Specifically, will the church honor its commitment to repay the loan? In evaluating this measure, lenders look for a long history of operations, a good credit history, and strong, committed church leadership.
Cash Flow
The second focus is on cash flow. Lenders want to see a track record of positive income and attendance trends as well as a positive operating margin (revenues in excess of operating expenses). Flat or declining attendance or income can be a concern, and operating losses mean that it may be difficult for the church to absorb a monthly mortgage payment within its budget.
Collateral
Finally, lenders need to know that the amount of collateral (real property such as land and buildings that will secure the loan) is sufficient to repay the loaned funds in the unlikely event of default.
If you are interested in securing a church loan, you will be better able to obtain favorable rates and terms by demonstrating strong performance in each of these areas. For information on financing options for your ministry, call 866.621.1787 or email loan@agfinancial.org.
