Church Development Services is not a lender yet we understand financing and help church’s we are building get loans.
We believe local community banks are the best option for most churches, the ratios and qualification criteria are pretty straight forward.
Church needs to have 25% of the total project in cash. (In the example below you would need 100k in cash plus some kind of reserve)
The loan to value ratio must not exceed 75% of the building once renovated. To use round numbers – the loan you may seek is 400k – the property value must exceed 520k.
At 110k in offerings you will normally be limited to a loan of 330k and this is assuming your excess cash flow is enough to cover the loan payment.
If you are a “new” church this gives lenders “heartburn”.
Even though you have many volunteers who will do the work – a lender will rarely discount this and will want to see drawings with the actual specs so they can do an as built appraisal. Make sure any and all volunteers have the proper licensing and that you get the proper warranty on anything you install.
If you are looking to buy an existing building and repurpose the Church, rules and codes for assembly may not cooperate with the existing structure. Make sure to check ADA requirements, Fire-life safety requirements, parking requirements and storm water management requirements. The amount of bathrooms – load for HVAC – enough power to do what you want in the Sanctuary also important to look at.
More often than not a church can get the zoning it needs.
My recommendation is to work with a local bank. Find out what you will qualify for in a loan and start saving the payment now – this will demonstrate to the lender you are serious. They are probably going to want to see a 10% contingency in the construction budget plus at least 6 months excess cash of monthly bills.