Financing Religious Use Property – Churches are Businesses Which Also Need Financing

Financing Religious Use Property – Churches are Businesses Which Also Need Financing

Financing Houses of God

Church lending can be intimidating even to the most seasoned loan officer or loan originator. However, financing a church and its dreams are not too difficult to master. The church loan or loan for religious use are not ordinary by any stretch of the imagination. Yet they can be rewarding and you can even make some money in the process.

Lending Fears

There are a few basic fears that keep most from lending on Churches.

Foreclosure. Foreclosing on a ‘House of God’ and ridding a community of it’s place of worship turns a majority of lenders off from the get go (not us, we love church loans).

Single Use-Special Use Property Type.The uniqueness of most church properties is another turn off for most lenders. What do you do with a building that has a steeple, choir loft, stained glass, naives, aspy’s, altars, pews for 300? What kind of resale market is there? How long will it take to sell? What if grounds also contain a cemetery? Now what?

Qualifying. Churches are not-for-profit organizations. So, they don’t have tax returns nor do they have traditional methods of determining income for qualifying. So, again most lenders will steer away from anything that is not traditional.

Lending is simple on Churches

When lending on a church the first criteria is to determine the denomination. Yep, denomination. Reason being that not all loan programs will lend to just any denomination. A statistic I picked up from the US State Department, is that there are 565 organized and recognized religions in the world. From mainstream to off beat, they exist. Since loan funds are derived from various sources or pools of funds, it is important to match the correct denomination with the correct sources. For example, you wouldn’t want to seek financing for a Temple or Shrine from a Christian Pastoral Retirement Trust Fund. These practices are not congruent in their belief systems with each other. The end game may be the same for all, however the path and practices to get there are very different and can be offensive to each other.

The next item is responsibility for the proposed loan. You need to determine if personal guarantees are going to be an issue with the religious organization. If not, you have just openned the door for sources to finance the church. However, over 85% of the time personal guarantees will be a big deal to the church and the sources that want the guarantee are out of the picture.

The third issue is banking business requirements. Some sources require the church to move most or all of its banking business to the institution that is writing the loan. About 50% of Churches don’t like this covenant either.

What is the basic information that you will need?

Church Questionnaire (a form of application)

Church’s Statement of Faith

Church’s Organizational Documents with a statement of Good Standing from the state of organization

3-yrs financials (e.g. Quick Books) + YTD profit and loss

Pastor’s or Church Leader’s Resume

Use of funds letter

Authorization to Lend Letter

Evidence of tax exempt status

Color Digital Photos of church property

Primary church contact or liaison person(s)

Although there are many additional items and steps, with these basics you are well on your way of being able to professionally present a package to a lender.

Rates, Fees, Making an Income

I almost forgot these key items. Church loans current have rates in the 6.50% to 9.50% range, with fees running in the 3-6% of loan amount.  This is the norm and is most typical. I know that there are times when Church’s obtain financing outside these norms, but that has to do with hundreds of variables specific to that organization.

As far as making income–in you think you are going to be earning 2-3 pts. on the deal…Stop. Not going to happen. Church loan sources are very strict about what you can earn, so if you get 1/2 to 1 pt on the deal, be grateful. When you do a great job for a church, Pastors, Deacons, Bishops, and other leaders talk–word gets out you treat them fairly, more deals will come your way.

By the way, if you missed it, we love church loans and we’d love to be of assistance. I can be reached via or visit our web site at


Gregg S Cochran, President of CFR Mortgage Group, Inc. a wholesale commercial lender based in Tustin, CA.