The best way to secure a church loan is to convince the lender that the church is stable, has a predictable three year stream of income, and is going to be able to repay the loan without any difficulties. The church lender must feel comfortable and it is up to the church leadership to put together a presentation that makes sense.

Preparation is key before approaching any lenders. Anticipate the questions that will be asked and have the answers already prepared. Some of the things that a church needs to have are:

* Architectural Drawings

* A fixed rate contract with the builder, one that cannot go over the estimate.

* The contract with the builder must be an AIA contract; one that conforms to The American Institute of Architects industry standard guidelines.

* All plans and permits must be approved by the local municipality.

* The builder must have Builders Risk Insurance, NOT a bond.

This will help convince the church lender that church leadership has carefully considered all aspects of the church building financing and the churches revenue stream is going generate the cash flow and be able to handle the loan payments.

Church lenders make loans based on cash flow. For a church loan, this means the loan payment will typically be in the range of 30% of total income. Church leadership will need to examine their historical income and expenses to be sure that it will meet this criteria. The budget should be analyzed to see if there are any expenses that could be reduced. The church leadership will then have to agree on the amount of loan payment that they feel is affordable.

Another lending criteria is the amount of total indebtedness. The range for the maximum loan amount is generally three to five times annual income. If annual income is $300,000, then the loan range is going to be approximately $900,000 to $1.1 million. If the church already has some outstanding debts, then the maximum loan amount is going to be reduced. In some cases, it may be preferable to secure a church refinance loan to consolidate old debts with the new construction loan.

If it is necessary to hire an accountant, ask him how many churches he has as clients. Also determine if he is familiar with non-profit accounting practices. Take a look at the article we wrote on church financing.

After the construction is complete, the construction loan will roll over into a permanent church loan.

Getting approval for a church construction loan can be a difficult process, but it is easier when you are prepared.