I was contacted recently by a pastor who was very dismayed and confused as to why he could not secure a loan from their bank. The financial institution did not explain the reason for the denial; they just informed the pastor that they “could not do the loan at this time.” Needless to say, the pastor was very disappointed with their response.

During our conversation, I discovered that there was a lot of exciting things happening in and for this church, some of which are:

1) Over the course of 20 years, the ministry of this church had shown constant and continual growth in the number of congregants, as well as givers. Their income had also grown year after year.

2) The church was in a bustling area of business and residential development with a highly regarded school system serving the children of the community.

3) The pastor and his young family had established roots in the community over 5 years and did not planto leave the area.

The pastor and the church had noticed the growth over the years and entered into a time of prayer. They were seeking God’s will for their church and community for the years to come. They decided that they were in need of a family life center to better serve their families and the community as a whole. Excited over this revelation, they immediately contacted an architect to draw up plans for their vision. This was mistake #1!

Never start a plan until you know how much of that plan you can afford!


Why Was Our Loan Denied?


Seeking a loan with the plans in hand for their vision only added to the disappointment when their loan request was denied by the bank.

Financial institutions commonly need to see more than just plans and documents showing historical growth to distribute a construction loan.

I began to question this pastor further, and the answers to these questions provided me the information needed to explain the reason for the loan refusal by the financial institution.

First and foremost, the church was spending all of the money that it was bringing in, leaving them with no cash reserve. The church would not have been able to make a mortgage payment without either a substantial increase in income or a dramatic cut in expenses.

Banks want to know not only that the church can make its payments, but if something bad happens, like COVID-19 for example, the church has a substantial cash cushion to be able to make its payments if funds become scarce.

Going forward, I advised the church to do the following in order to improve their chances of getting a loan approved next time they apply for a loan.

Here are the top 2 things you need to do before applying for a loan for a new church project:

  1. Immediately begin to cut unnecessary expenses and develop a cash fund of between 3 to 6 months operating expenses in a cash account. This will display strong cash management skills by the church leadership for the financial institution to see.
  2. The bank is going to ask for results of your capital campaign. I explained to the pastor that a bank will want as much of the church’s money going into the project as possible.


What Banks Expect


A church capital fundraising campaign typically asks the church members to pledge an amount over and above their normal giving amount to go toward the church building fund. For example, if the building project is a one-million-dollar project, the church will need to put between $200,000 and $300,000 into the project before the bank advances any money toward the construction. A capital campaign will also reveal how committed the church membership is to the building project.

Banks will typically finance about 70%-80% of the construction costs, so the church is going to have to have a substantial amount of money to put into the project to cover the remaining costs. Most banks are looking for at least 75% to 80% of the membership to submit a pledge toward the campaign. A lesser percentage might reveal that the membership is not truly supportive of the project and could possibly withdraw their support once the loan is secured from the bank.


Bringing Him Glory


Our God is the God of miracles, of awe and wonder. He is also the God of order and process. We stand speechless in amazement when the miraculous occurs and we should stand in the same manner when we follow His steps and process to accomplish His vision for our lives and His church.

The process that we follow at Ascend Stewardship and Consulting for accomplishing His vision is truly His. Following His steps now, and later in the future will keep you from being disappointed…and it will have you prepared for the victory.

If your church is thinking of starting a new building project and needs guidance through the process of planning and executing a capital campaign, please take a few moments to complete our FREE Church Evaluation. It will provide us with the starting information we need to analyze your church’s needs and help you figure out how to accomplish your goal.


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