When shopping for a church loan, understanding the kinds of questions you may be asked will better prepare you for the process. As a follow-up to our post 12 Questions to Ask When Shopping for a Church Loan, below is a list of common questions lenders ask borrowers.
- What is your project timeline? The amount of time it takes from applying for a loan to actually receiving funds may be longer than you expect. Having a good idea of the steps involved to complete your project will prepare you to answer this question and more easily adjust your timeline to fit the loan application process, if needed.
- Can you provide the church’s financial statements?
Lending institutions ask to see a church’s financial statements because they are an accurate reflection of the financial health of the church (i.e. the church’s ability to repay a loan). Some institutions are more thorough than others in their assessment of church financials. Churches should be prepared to provide at least three years of income/expense statements and balance sheets. In general, the lender will look at the statements for evidence of stability and borrowing capacity.
- What is your plan for paying off the debt?
Another way this question may be asked is “what is your plan for growth?” Being able to clearly outline your goals for ministry growth over the next few years helps build your credibility as a borrower. Furthermore, having a defined plan for repayment allows for realistic budget planning and reduces risk of default.
- How much cash are you investing into the project?
This question allows a lender to see how much you need to borrow as compared to the total cost of the project and helps them calculate certain ratios and risk level. It also provides tangible evidence of the church’s level of commitment to the project.
- Has your project been approved by church leadership?
While not every lender will ask this, it’s an important question. Some church bylaws require approval of the board or even the church membership before acquiring new debt, while for others the pastor makes the final decision. Before you apply for a loan, be sure all essential stakeholders are informed and supportive.
As you think through your financing needs and engage lending institutions, keep these questions in mind for a more effective discussion that moves your church forward.
To explore church financing options, call 866.621.1787 to speak to one of our loan consultants.