Church Loan to buy or build
We are often asked if given the option of buying a building or constructing a new one which should a church choose. The answer is more complicated than the question and often depends on the needs of the church, the cost to construct the new building vs. purchasing the existing building, and the future plans of the church.
If the church is able to purchase a building that is existing and it fairly meets the churches current needs and has the ability to meet future needs over the course of the next 5 years then a purchase is probably the right choice. A purchase gives the church the ability to know with relative certainty the costs involved where as construction can often times have unforeseen cost over-runs, time delays and complications.
If the church can not find a suitable building then construction is the only option. If this is the case then remember this simple tip:
- Always contact a financing company like ours to determine what the church will be able to borrow before you work with the architect. This will save time and money. There is no need to spend thousands of dollars on construction plans that will never be used, let the church financing company tell you what loan amount will likely be approved and then you can sit down with the architect and design a building around that budget. Every month we receive calls from churches looking for financing to build a church, some of these churches have spent thousands of dollars on plans, many have even started spending their money on site development and ordering materials. Unfortunately many of these churches will not be able to qualify for the church loan needed to complete their project.
An example of a church loan request that we recently received was from a church that was in the exact situation described above: The church sold their sanctuary in 2008 which was owned debt free and received about $900,000 in proceeds from the sale, they took about $40,000 and had new plans designed for a larger facility to be built on a vacant piece of land they owned. They spent an additional $400,000 on site work, permits, plans, and materials before they applied for a loan. The total cost of the project was about $3,000,000 of which they needed to borrow a little over $2,000,000. The problem was that the church had total income from tithes and offerings of $200,000 and almost no income left over after expenses. There was no way they could qualify for the loan; the church had no option but to continue renting and to have the plans redone to a budget they could afford.
The moral of the story is: Get your financing in order before you pay for your plans or start building your church.
If you or someone you know is looking to build a church we would like to send you a free book that will help you with the planning of the project. There is no obligation, just send an email to Freechurchbook@churchloans.net and we will send you one right away.