As published in Scotsman Guide's Commercial Edition, August 2007.
Many mortgage brokers shy away from seeking funding for churches because they've heard it can be especially challenging. Often, however, the things they've heard are nothing more than common misperceptions.
If you're steering clear of church lending, you could be missing out on some of the most financially rewarding loans you ever close. Learn to separate the truth from the misconceptions about financing places of worship.
Churches and other places of worship bring together groups of individuals who meet to express their similarly held beliefs. The location can be a rented facility, such as a school or a bowling alley, or a more traditional religious structure.
Regardless of where the members meet, there will always be two guarantees. First, the congregation will be made up of local people, many of whom were referred to the place of worship and who will most likely refer other people. Second, as the congregation grows and the number of members exceeds the limit of the facility, they will need a larger one.
This is where you come in. If you conduct the transaction well, you not only will have the opportunity to finance a commercial building, but you also could gain dozens, if not hundreds, of positive referrals from the congregation members.
Although each loan scenario presents its own challenges, some commonly held beliefs about faith-based loans are more accurate than others. Consider the following 10 beliefs, for example. Understanding what's true and what's false among these beliefs will make funding these loans easier.
Banks don't like church loans.
True and false. Banks like the church's checking account, but they're reluctant to lend on a single-use property. Depending on the building type, condition and zoning, banks may consider it. But a bank's focus is on the checking and savings accounts. If a low-volume, neighborhood bank sees an opportunity to get in on the ground floor of a growing church, it may take it.
Not all church lenders will lend to all faiths.
True. Although this may sound like a violation to some people, it is actually a generally accepted practice. Faith-based lenders often will only lend to churches and organizations that share their beliefs.
This issue can easily be dealt with by obtaining the congregation's statement of faith. Once you have this, you can narrow the field of potential lenders. Some organizations are pretty strict about those institutions they choose to finance.
Churches don't shop their loans.
False. On virtually every board of every congregation, it's a safe bet that someone knows a mortgage broker. Or maybe the treasurer has a license. Or the church may go back to its existing lender, the local bank.
No matter what the situation, the church has every right to get the best deal it can. It's your job to be that best deal.
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