Religious properties like churches are defined as a specific type of commercial property. Whether you need to manage the cash flow or to look to expand the premises of your church, you can apply for church financing from a specialty lender.
From construction and improvements to the acquisition of new land, you can get a loan for any purpose related to the expansion of your church and its services. Here are the types of loans available for churches:
SBA-Backed Church Loans
Some commercial real estate owners qualify for SBA loans that come with a government guarantee. In this case, if the borrower fails to pay the mortgage and lender goes for foreclosure, the government covers the losses sustained by the lender. However, non-profit organizations like churches are not allowed SBA loans unless they are under an emergency.
Church Loans with Personal Guarantee
Some lenders offer church loans with your personal guarantee. It helps to provide a loan even if your church does not qualify for a loan according to its income. But, if the leadership is ready to guarantee their assets, you may still get the financing.
Usually, the entire loan amount comes with a personal guarantee. However, you may also apply for a limited guarantee for some loans. It can be either for a partial amount of the loan or partial term.
Hard Money Loans
If you cannot find financing through a traditional loan, you may go for hard money loans offered by private lenders. These loans have specific terms with 50-60% LTV. When compared to conventional lenders like banks, these asset-based lenders can close the loan quite fast with minimum documentation. It gives an excellent opportunity to the churches facing foreclosure, decreased income, or poor credit.
So, when your church has financial issues, you can work them out through private money loans. They have no credit score requirements or application fee for processing your loan application. You can get your loan in a short time, lesser than two weeks in some cases.
A Seller-Held Second Trust
When combined with the traditional type of church financing, seller-held second trust can be an excellent option for the construction or acquisition of a new property. In this loan, the seller of the property will lend a portion of the total purchase price to the buyer.
These loans have a maximum LTV of up to 80%, which means the lender will offer 80% of the purchase amount, and you have to arrange the remaining 20%. If you need a new property but cannot arrange the desired funds through traditional methods, this financing can work for you.
Permanent Church Loans
The first mortgage financing allows your church to purchase new facilities or refinance the current loans. These loans are permanent and have fixed interest rates. You can find a lender offering flexible terms and long-term financing with competitive rates to meet your financial requirements. Try not to choose short-term balloon notes that often make your ministry financially vulnerable due to their shorter loan term of up to 5-6 years.
Each type of financing has specific benefits. You need to consider the requirements of your church to make the right choice and choose a reliable lender for the same.