Last week we talked about the types of information a financial institution will ask for when your church applies for a renovation or building loan. Now we look at what the information reveals to the bank, both good and bad, and other advice for church leaders, as we continue our two-part series discussing bank financing with loan officer, Pete Cassanos, vice president of Park National Bank. PNB is a local Ohio bank that has over 20 branch offices and ATMs in two counties. For more than 100 years they have supported the financial needs of local families, businesses, and communities, including churches.
Signs of Church Health
The first thing Mr. Cassanos does when examining an application package, is look at the overall health of the church that is seeking a loan. In terms of demographics, he’s looking for a steady growth in membership, giving units, and attendance over the past three years. He’s also concerned with what percentage of the current operating budget is being directed toward existing or proposed debt payments.
In addition, Mr. Cassanos analyzes prior or current pledge campaign data to see how successful the church has been at getting members to commit to church building projects. He pays close attention to the burden that falls on each “giving unit” to pay back the loan, and whether that amount is reasonable—in other words, are there enough families pledging, so the amount each family has to pay will be kept fairly low?
Mr. Cassanos also watches for certain red flags in any church’s data package. Is there excessive turnover in leadership, especially the minister? Declining membership or attendance is another red flag, as are disappointing pledge campaign results. Finally, a high expected burden for each giving unit will often indicate that a smaller church is taking on too much debt at one time.
Advice to Pastors and Church Leaders
The most important advice that Mr. Cassanos gives is to start early. He recommends meeting with your prospective lender at least six months before you hope to start construction. After reviewing your application, the lender should be able to provide your church leadership with insight into what size of loan will make the most sense, as well as any potential problems that might arise. This will give you additional time to solve any concerns that come up, while staying on schedule, which in turn will save time and money with your architect and builder.
So if you’re part of a church leadership team that’s hoping to expand its facilities with a renovation or new church building project, keep Mr. Cassanos’ wisdom in mind. We also suggest that you sign up today for our free i3 webinar series, which will provide you with additional information on best practices and necessary steps as you pursue the fulfillment of your church’s vision for ministry in your local community.