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A church loan is any financing that a religious or faith-based organization (including Christian, Jewish, Muslim, or other religious groups) takes out to help with the cost of building, maintaining, renovating, expanding, or refinancing a property. A church loan may also be used to get cash to help improve cash flow and cover daily expenses of running a religious organization.
In general, faith-based organizations and churches are nonprofits, which means that they are tax-exempt and receive other benefits. Typically a church will receive funding from tithes or offerings from constituents as well as grants or other financing from their overarching religious affiliations. They may also receive money in the form of tuition for a church-run school, camp, after school program, or renting the property out for secular meetings and events.
However, the cost of maintaining a property may be more than a church makes from its attendees’ tithing or other income sources. In this case, the church or faith-based organization may decide to seek out a church loan.
Churches and faith-based organizations can take out small business loans, including those offered by the Small Business Administration (SBA). Because they are usually nonprofit organizations, churches may have better luck getting a business loan meant for a nonprofit as opposed to a traditional business loan.
Because churches are considered high-risk organizations, it may be difficult to find a business loan from a traditional bank or financial institution. There are many faith-based financial institutions that loan specifically to churches and other faith-based organizations. Alternative lenders may also be more likely to loan to a church or faith-based organization, although these loans can come with strings attached like higher interest rates, shorter terms, or a longer loan process including more paperwork.
A church may consider business credit cards or a business line of credit to help manage daily expenses or smaller financing amounts. These are typically easier to qualify for, and you only pay interest on the money that you spend, rather than a chunk of money all at once.
Finding a church loan may be somewhat more difficult than a traditional real estate loan or other type of financing, but there are many institutions that cater specifically to religious organizations. If your church has an existing relationship with a bank or credit union for your day-to-day financial workings, it’s best to look to them first and see what they may be able to offer.
Business loans for nonprofits can be an excellent place to look for a church loan. A church that is trying to renovate an existing building, expand a place of worship, or even buy real estate to build a new church may be able to qualify for a commercial real estate loan. Some that cater specifically to non profits include:
Many traditional banks and financial institutions offer loan programs for church lending for places of worship and faith-based institutions, including:
There are also faith-based lending institutions that cater specifically to churches, such as:
Alternative lenders who offer short-term business loans may be a good solution for a church or faith-based organization that has trouble finding other sources of financing, especially if they have bad business credit or don’t have a long enough financial history to qualify for traditional loans. Some short-term lenders include:
Many churches and places of worship do have mortgage loans, because real estate is expensive, even for churches. Most religious institutions will have fundraising drives among their communities or constituents to help pay for big expenses like new church buildings, but they may still need major financing to pay for a new property or renovation.
A church or faith-based organization can use a church loan for a number of reasons, including:
The loan options available for churches can depend on your location, financial status, down payment, available collateral, and much more. Some basic steps before signing onto a loan include:
The loan amount a church can borrow depends on several factors, including:
In general, a religious organization or church can borrow up to four times the gross income from tithes and offerings. Many financial advisors also recommend that you not spend more than 30% of your church’s income on debt payments for a mortgage or other loan, just as you would budget for a personal home mortgage payment. Since tithes and offerings can be cyclical in nature and not necessarily the same from month to month, having a good idea of your yearly income over time can help you calculate these numbers.
Getting a loan for your church or religious institution can help you build a place of worship or improve your existing structures. Nav can help you do the research to find loans that you qualify for by tracking your business credit and other factors. Sign up for a free account today.
This article was originally written on May 20, 2022.
This article currently has 1 rating with an average of 4 stars.
Kat Cox
As a digital marketing writer for Nav, Kat Cox works to provide answers to the questions small business owners have about how to set up, run, or fund their businesses. When she’s not writing blogs, articles, short fiction, or (kind of bad) French poetry, Kat can be found lacing up her tennis shoes for a run or walk with her pup or scouting for the best karaoke spot in Austin, Texas.
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The information given here enlightened me so much,I did not know that there is the way to plan well for church loans, thank you.
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