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by Martin Sinderman     Added February 08, 2012

As published in Worship Facilities, Jan/Feb 2012

There’s as much art—how you build relationships with lenders, how you initially approach them, how you present yourself and your church’s financials—as there is science in successfully negotiating the loan process.

Strategy-wise, there’s one thing to keep in mind when dealing with lenders: they are happy to see you/your church come in the door these days.

“Keep in mind that banks love church loans,” says Don Lawson, principal and CEO of Sarasota, Fla.-based Lawson Group Architects Inc., and chairman and co-founder of Sarasota-based Bank of Commerce where, for the past 11 years, he has been on the bank’s loan committee.

Church properties are typically well-located and, compared to other types of commercial real estate, have very low loan default rates, so they are generally regarded as good risks, according to Lawson, who also consults with churches on how to be successful in seeking loans. In addition, most churches are stronger financially than they realize, “but they just don’t know how to present and take advantage of this strength in the best way when seeking a loan,” he says.

Set up competition

Churches can leverage this strength by setting up an environment where lenders compete for their business, according to Lawson.

“Never just go to a single bank and ask for a loan. Instead, organize your loan package in a Three-ring binder and take it to several banks, asking each of them to take a look and, if they are interested, to provide you with a letter of interest with a terms sheet within ‘x’ number of days—and make sure you tell them you are doing the same thing with a number of other banks,” says Lawson.

Creating a situation where multiple lenders must compete for your business will also save you money, according to Lawson.

“If a loan committee knows their bank is competing for your business, they are more likely to feel they need to drop the interest rate, or reduce or eliminate loan fees—because they do not want to lose your business.”

The loan package itself …

The visual qualities of a loan application package are in some cases just as important as the material within, Lawson reports.

“You need to put together a presentation that not only has the content the bank is looking for, but that also looks good, and that will typically knock a loan committee’s socks off, because most churches go in with a compilation of printouts and just hand them over in a folder,” Lawson says.

Make your loan package attractive by putting it in a three-ring binder, which should contain the necessary information organized by type and separated by tabs. Make it graphically, visually interesting by including project photos, renderings, website information, and anything else pertinent, Lawson suggests. But don’t bother with creating DVDs or Cds, “because these typically never make it to the loan committees.”

Content-wise, churches need to be sure to provide in-depth information on their pastors and their vision, as well as on other members of the leadership team, according to Lawson.

“The bank needs to know more than ‘the pastor has been there more than three years’—it needs to understand the vision of the church,” Lawson says. Including detailed resumes from the pastor and members of the leadership “shows members of the loan committee that this church not only has a pastor with experience, reputation and vision, but also a leadership team that is made up of respected individuals in the community [that] they know and have done business with, which has a big impact on a bank’s decision.”

Application tips

In preparing a loan application, presentation is everything, notes Therese DeGroot, market president of Lake Forest, Calif.-based Community First Financial Resources.

“Much like interviewing for a job, you want to put your best foot forward in presenting a well-organized, professional, and thorough loan package,” DeGroot says. And she adds, “The better the quality of the information you articulate to lenders, the more successful you will be in terms of maximum loan amount, maximum confidence on the part of the lender, and the best pricing available.”

No matter what you are requesting financing for, DeGroot says, your loan package should include—in a simple, direct, and consistent format—the purpose of the loan; the history, mission and vision of your organization; a budget for your project; information on your capital campaign; current and three years’ historical financial statements; membership/attendance/ enrollment figures; an overview of your ministry and outreach programs; background on your pastoral staff; and brochures, Cds, and a DVD on your church’s programs and services.

From a strategic standpoint, “In selecting your provider be sure to meet not just the lender’s relationship manager, but also others on the team and, if possible, the actual decision makers,” DeGroot says. A long-term relationship with your lender is important, she notes; and by cultivating other members of the lending organization, “in the event the relationship manager

Moves on, you won’t have to start all over again explaining your important work.” Take care to find a financial partner that truly understands and supports your church’s unique mission, DeGroot adds. And afterwards, “Take the time necessary to form a long-term relationship that will withstand the expected and unexpected ebbs and flows that every faith-based organization experiences.”

A couple of secrets

One “secret to success” in applying for a loan is to have your financial statements professionally prepared by a Certified Public Accountant (CPA), says Scott Rolfs, managing director and head of the Religion & Education practice line with Chicagobased Ziegler.

“Lenders who receive loan packages with CPA-prepared financials generally move those applications to the front of the line, since they are easier to evaluate And typically more reliable than internally prepared church financial statements, which often can be very confusing and inconsistent,” Rolfs says.

A good CPA can take your statements and put them in a Generally Accepted Accounting Principles (“GAAP”) format for a cost of perhaps $500 to $2,000, Rolfs notes. The statements do not have to be audited, he adds, just simply “compiled” by the CPA.

If your ministry does not want to incur this cost, “Then at least include with your loan application a five-year profit and loss summary of church Operations done on an Excel spreadsheet or the like,” Rolfs says. “This will make it easier for the lender to evaluate your financial strength and trends—and the exercise of preparing this will also pay dividends with your board and management team.”

A second secret to the loan application process is to include an aerial photomap from web mapping sites such as Google or Bing, showing the location or site of the project you are seeking financing for, adds Rolfs.

This type of presentation should only take a few minutes to prepare, Rolfs notes. “Lenders will eventually do their own research on your property, but this speeds up the process, and again can make your presentation stand out.” Also include “a blurb or two on your community demographics,” he closes, “and what geographic locations you draw your membership from.”

Martin Sinderman is an Atlanta-based freelance writer and a regular contributor to Worship Facilities Magazine.