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The good news is that the church won't need to pay cash at closing. Property equity, in the form of a seller second, is an option that, if structured correctly, can reduce the cash needed at closing.
3. If they find a good deal, churches need no money down.
Again, this is true in theory, but it's not practical. No-money-down loans are doable, but there are only a few lenders that will consider such loans. The qualifying criteria for loans such as this are rigorous. The majority of no-money-down loan proposals never receive funding.
As stated earlier, the church must be prepared to pay soft costs. There is no getting around that. Congregations having trouble coming up with a downpayment should consider creative options such as partial-seller financing, cross-collateralization and capital-stewardship programs.
4. Lenders don't fund small church loans.
It is true that many lenders will not finance loans less than $250,000. This is because it takes some lenders the same amount of due diligence to fund a $250,000 loan as it does to fund a $2.5 million loan. There are lenders, however, that will lend on any amount, large or small. A church-financing specialist should know these lenders.
5. Churches may be hesitant to work with brokers.
Congregations typically try to eliminate unnecessary church expenses. For some, this may include broker fees. These clients typically return, however, once the banks have said no. Feel free to tell potential clients that if they can get the loan without you, they should. You can be confident doing this because it will be a challenge for them to get financing from traditional lending institutions.
Beyond the myths
If you are going to broker church loans, you must have good relationships with money sources that are flexible enough to close loans that traditional institutions will not. You should know which lenders will say yes when banks don't.
Further, in church loans, you will often have to be more of a consultant than a loan officer. Your clients will need referrals to accountants, architects, general contractors, engineers and lawyers to compile an acceptable financing package. If you do not have trustworthy contacts in these areas, you will find it difficult to consistently close loans.
Finding lenders that will finance churches can be hard if you don't specialize in it. Experienced brokers, therefore, have the most to offer congregations in need of financing help.
Rob Williams, director of the church finance division of First Capital Commercial Finance, offers funding solutions to churches that are ready to acquire or build a new facility, as well as consulting services to church staff that want to prepare for future expansion.
He helps churches move from their current facilities to obtain the land they need to fulfill their mission. Contact him at Rob@PossessingTheLand.com or (713) 267-4040. Visit www.PossessingTheLand.com and www.dealsdone.net for more information.
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