One of the most intimidating parts of remodeling your church building is getting the funds in place to do the actual work. It’s why we spend so much blog space discussing the process. For example, take a look at Look beyond Lending Institutions and How Lenders Determine Church Financing Today for some our previous articles on the topic.
There are so many factors to consider and steps to take. It’s no wonder that submission of incomplete information is one of the biggest mistakes churches make when soliciting financing from lending institutions. So that your church doesn’t fall into this category when it’s time to construct or remodel your church building, here’s a summary of the information that you’ll need to submit.
Leverage Church Leader and Membership Credentials
Your church membership and history are very important when obtaining financing. The lending institution will want to know about your church’s denomination and its longevity in the community. Attendance numbers and information that represents your membership growth over time, along with the average age of the congregation will also be important to quantify. Information about community ties and the geographical area serviced by your church are also important because small banks and lenders like to invest in their communities.
Lenders want to know about church leaders too. Make sure to attach the pastor’s resume and list key trustees/staff members, enclosing resumes where appropriate, to show a solid core of individuals committed to the vision of your church.
Provide Financial information
It goes without saying (but saying it doesn’t hurt) that you’ll need to provide clear, easy to follow financial details. Gather your financial data—balance sheets, income statements, cash flow statements—for the last three years and prepare interim financials if the end of the most recent year is greater than four months away. You’ll also need to document the number of giving units and the average amount given by each unit.
Summarize the Church Building Project
Lenders will want to know how the money they lend is going to be spent. Submit the church design, along with any schematic drawings and the project scope and location. Include how your vision for the project will improve the congregation and community.
Prepare a complete, transparent budget for the bank to easily follow. You want to avoid a scenario where you come back to the lender a few months later asking for another $100,000!
Here are the four components in an all-encompassing budget:
- The building: Painting, remodeling walls, flooring, carpentry, masonry, trim and any other expenses related to construction on the building itself.
- Site work: Anything around the building like parking lot spaces, excavations, landscaping, water, sewer, gas, electric lines and sidewalks.
- Architectural and permit fees: Church architect and/or municipal permit fees, utility fees, insurance…any ancillary costs.
- Furnishings, fixtures and equipment (FF&E): An inventory of tables, chairs, desks, audio needs, lighting, video systems and computer systems purchases.
Detail Your Capital Stewardship Campaign
Include information on other sources of project funding, including proof of cash on hand (cash flow statement) and your vision and details for any planned capital stewardship campaigns. Submit information on campaign projections, pledges and results, and provide a meaningful history about previous campaigns (Note: A good reference source on capital campaigns is The McKnight Group blog Key Capital Stewardship Campaign Concepts for Church Funding.)
Mention your collection projections, rate and the methods used to maintain a consistent flow of donations.
Are You Ready?
Whether you’re building now or in the future, it’s a real advantage to establish financial strength as soon as possible to improve the prospect of securing funding for a future church remodeling project. Make sure to operate within income, create a building fund, maintain good records and grow your church by increasing the number of giving units and the amount of giving per unit.
Then when you are ready, a friendly lender will be easier to find.
To learn more about financing and other church building topics, be sure to sign up for any (or all) of The McKnight Group free i3 webinars by visiting our website: https://www.mcknightgroup.com.