Our Church Needs a Loan…Where do I start?

May 24, 2021

Your church has a vision. Now you need funding. What is your next step?  Ty Salter, Chief Lending Officer with The Baptist Foundation of California, shares THREE TIPS to help you get started on the right track.

Churches have different needs for a church loan.  Some are looking to purchase property, while others are planning to build a new facility.  Some are seeking funds to remodel, and others need to restructure their existing loan. Regardless of your church's reason for a loan, here are a few tips that can help the process go smoother for you and your team.



Engage a CHURCH LENDER Early In The Process

Churches should consult with an experienced church lender before engaging construction professionals.  A seasoned lender can help you understand not only your church’s borrowing capacity but help you avoid common pitfalls of building projects.  Their experience with municipalities, contractors, and architects will be invaluable to you as you navigate areas that can be costly to a borrower if not managed correctly from the beginning.  Their proper guidance is especially critical during the project design or engaging in a purchase or contract agreement.  A trustworthy lender can help prevent inefficient decisions and save resources with any early miss-steps.


Tip #2

Reference Basic RULES OF THUMB for Church Lending

As in any industry, there are “rules of thumb” in church lending that can help direct your planning as you consider your loan needs.   Here are a few to consider:

  • A church can usually borrow about two to three times last year’s undesignated income. For example, if a church’s undesignated income was $100,000, then the estimated loan amount or "borrowing capacity" is about $300,000.  This number can change (up or down) based on actual church expenses.
  • Personnel costs (salaries and benefits) should be 40%-50% or less of undesignated income.
  • Annual projected debt service should be 30% or less of undesignated income.
  • The church should typically plan to contribute a minimum of 25% of the anticipated project costs.

Before applying, the church should have an excellent payment history with existing/previous loans, lease payments, and all vendor accounts.

Lenders like to see churches with:

  • Positive-growth trends
  • Vibrant ministries
  • Mission engagement
  • Annual balanced budgets
  • Well-constructed financial statements (balance sheets, income, and expense)

Tip #3


Before shopping for a church loan, develop a Project Package in which you address key areas that will help the lender understand your church’s history, culture, and trends.  The packet will also be helpful as your finance team continues to communicate the vision to the church membership, especially to those members who can provide significant support.  The packet could contain items such as:

  • The vision and history of the church
  • Current ministries of the church
  • Description of the project the church is considering
  • Description of capital funding campaign
  • Anticipated loan amount needed
  • Financial Report for past three years plus current year
  • Attendance Report for past three years plus current year (both small group and worship)
  • Description of how Covid and virtual worship have affected the fellowship of the congregation
  • Constitution and bylaws
  • Articles of incorporation
  • Bio of the senior pastor

When you begin your application for a church loan, perhaps these tips will be helpful to you as you advance the vision of your local church.  The Baptist Foundation of California exists to provide resources to help you accomplish the Great Commission.  If we can be of service, please contact Ty Salter at 909-738-4000 or .  He will be glad to assist you and your church.


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