"What you need to know about financing your construction project before it is too late"
We have all heard from the media that the US economy is experiencing the worst credit crisis since the Great Depression and I have news for you … it’s true! This doesn’t mean that your ministry can’t obtain financing, even though it has become more difficult to find lenders who are willing to lend. There are a few steps your ministry can undertake to help ensure you will be approved for financing.
Just as with our personal budgets, your ministry should adjust your annual budget to reflect a likely decrease in revenue. This will show a potential lender that you are aware of and prepared for the recession and the ensuing decline of ministry revenue. Postponing any capital and/or operational expenses that does not jeopardize core ministry initiatives is a great way to shave a few percentage points off your annual budget.
It’s not that lenders are not still lending, but rather they have tightened up their underwriting criteria. It is important to reduce the amount of financing requested in order to fit within the current underwriting guidelines of most lenders. This can successfully be done by partnering with your builder in a few key areas in regard to the design of your new facility.
Using “Gifts-In-Kind” is a great way to achieve your goal of reducing the amount of financing requested without forfeiting quality or size of your facility. “Gifts-In-Kind” essentially are donations of building materials and/or skilled labor that can be utilized towards the construction of your new facility. Many ministries do not fully utilize this option primarily because they have not fully explored their relational matrix. Give it a try … you may be pleasantly surprised.
Phasing your building project is another key way your ministry can still achieve its facility goals. Your ministry should consult with your builder about the possibility of shelling out non-essential areas of the building to reduce construction costs while allowing for easy expansion once finances are more readily available.
If all else fails and your ministry is still having difficulty securing the necessary financing to complete your building project, I suggest that you look within your ministry rather than outside for financing. Self-directed financing is a great option for many ministries who are having difficulty securing financing from a lender and/or are in need of flexible financing terms. Identify the top 10 – 15 net worth individuals within your ministry and ask them to invest in a secured bond that is collateralized by the church property. You may be surprised at their willingness to invest in the work that God is doing through your ministry.
With these tips, your ministry can survive the credit crisis and achieve the vision God has given. Call Church Mortgage Solutions today to explore these and other creative funding options.
Posted November 25, 2008
By: David Dennison |
