Best Banks for Church Loans: A Complete Guide to Religious Institution Financing

Church administrator at the bank for help with a church loan

Churches may need a church loan to meet the ministry’s expansion needs. A loan can fund a new church building, renovations, or support community outreach efforts. But churches must think carefully when choosing a bank that’s right for them.  

The right bank can boost growth and sustainability. The wrong bank can mean high fees and interest rates, strict repayment terms, and limited customer service. This article will review the best banks for church loans to ensure you work with the right provider.  

 

Table of Contents  

 
 

Key Factors to Consider When Choosing a Bank for Church Loans 

Woman contemplating which banks are the best for church loans

Churches must consider key factors when determining which bank is right for them. They include: 

Interest Rates and Terms 

Interest rates are a key consideration in church funding. They significantly impact the amount you owe for a loan. Here are some tips that will help you determine if a bank’s interest rates are fair:  

  • Shop Around: Get rates from different lenders before deciding.  
  • Check the APR: The Annual Percentage Rate includes the interest rate and fees giving you a clear picture of how much you’ll owe.  
  • Consider Your Credit Score: Your credit score will affect your interest rates. Most lenders require a score of at least 600 when granting a loan. However, institutions with credit scores of 740 and above will get better rates.  
  • Compare Interest Rates: Compare interest rates within specific loan types to ensure you get a good deal.  
  • Look at Average Interest Rates: Research market trends to ensure your bank is offering competitive rates.  

Loan terms are another consideration. They impact your interest rate and fees. For example, lenders typically charge an origination rate to cover the cost of processing the fees. Some charge a prepayment fee which means you’ll pay extra if you pay off the loan early.  

Repayment plans also vary. Common ones include:  

  • Income-Driven Repayment: IDR plans consider your income and family size.  
  • Graduated Repayment: Payments are lower to start but increase every two years.  
  • Extended Repayment: Repayment periods can be up to 25 years.  
  • Income Sensitive Repayment: Allows interest-only payments for up to five years.  

Experience with Religious Institutions 

It’s wise to work with a bank that has experience with religious institutions. These lenders are more willing to support churches than other lenders. They are also more aware of the church's financial needs and may provide a simpler application process.  

Some of the best banks for church loans include:  

  • Griffin Church Loans: This institution has been funding churches for over 20 years. They have closed over 2000 church loans totaling $2 billion.   
  • BCLC Church Loans: BCLC has over 70 years of church loan experience. They provide loans for new construction, remodeling, and property purchases.  
  • AG Financial: AG Financial provides loans for various worship center financing needs. They can help with investments, planned giving, retirement, and insurance.  

Loan Products and Services 

Financial institutions provide loans for various projects. Common church loan needs include: 

  • Construction: The church may need funding to construct new church facilities.   
  • Remodeling: Church capital improvement loans may be necessary if parts of the church are damaged or require remodeling.  
  • Refinancing: A refinancing loan replaces an existing loan with the hope of getting better terms.  

Ensure the lender you use provides the loan you require.  

Financial institutions may also provide faith-based lender services like:  

  • Financial Counseling: Some banks have financial advisors that offer counseling. You may also work with a credit counseling agency that helps borrowers with debt management plans.  
  • Investment Options: The lender may have various investment options such as personal loans, home equity loans, margin loans, and hard money loans. Consider your choices to determine which is right for you.  

Customer Service and Support 

Comprehensive customer service and support are essential. When it comes to money, people want answers quickly. Additionally, clear communication increases transparency in the lending process.  

When comparing lenders, consider their responsiveness and knowledgeable support. They should provide guidance and not overwhelm you with jargon.  

Responsiveness is ensured with a dedicated relationship manager. Your manager should be available to answer your questions. They should be familiar with your loan status and needs.  

 
 

Top Banks Offering Church Loans 

Church administrator on the computer figuring out the best banks for church loans

Now that you know what to look for when considering the best banks for church loans, you can make an educated decision on which to choose. Here are some recommended options. 

AG Financial 

AG Financial provides various services to faith-minded families and individuals, churches, and ministries. Church services include religious organization loans, investments, retirement, insurance, and planned giving. Loan options for ministries include:  

  • First Perm Loan: This innovative product is ideal for nonprofits seeking long-term church loans. It is designed for high-performing church plants that show an outstanding vision and strategy growth.  
  • Permanent Loans: These loans focus on permanent, first-mortgage financing with flexible terms and rates that help churches successfully purchase facilities or refinance existing loans.  
  • Construction Loans: Construction loans cover new construction and renovation. They convert to permanent finance with no-cost competitive rates after construction is complete.  
  • Credit Lines: Credit lines provide ongoing cash flow for short-term expenses.  
  • Vision Loans: Vision loans are for large churches that may consider buying a new campus or building a new facility.  
  • PAC Startup Loans: Parent Affiliated Church loans are for churches looking to build or revitalize a daughter church.  
  • Facelift Loans: Facelift loans help churches remodel or upgrade equipment.  

AG stands out because it supports its clients’ ministry growth and financial health. The team offers products and services that are competitive with loans offered to for-profit industries. The institution has served more than 66,000 clients worldwide, partnered with over 4,000 churches and ministries, and distributed over $500 million through planned giving in the past 10 years.  

Union Bank & Trust 

Union Bank & Trust is among the recommended financial institutions for church loans. It offers various traditional bank services including CD specials, credit cards, and college planning. The institution specializes in several business industries including churches. Their financial products include:  

  • Refinancing: The institution helps churches refinance loans and get terms that suit their financial goals.   
  • Purchase Loans: Union provides loans that can be used to purchase property and other big-ticket items.  
  • Construction and Renovations: These loans will free up cash flow allowing lenders to make interest-only payments during construction.  

Union is a preferred choice because the institution understands the church’s unique needs and challenges. As a family-owned bank, they share church values and a commitment to stewardship. Lenders act as partners and advocates guiding churches through the lending process.  

Christian Investors Financial 

Christian Investors Financial partners with individuals and churches to finance various needs. They offer investments and loans that support kingdom expansion. Their loan products include:  

  • Construction Loans: Construction loans help churches and ministries build new facilities and remodel structures.  
  • Real Estate Term Loans: These loans can fund purchases of existing buildings and raw land.  
  • Refinance Loans: CIF helps churches find more favorable rates and terms so they can devote more to expansion.  
  • Operating Line of Credit: These loans offer cash flow to assist with unique church needs.  

America’s Christian Credit Union 

America’s Christian Credit Union offers traditional banking services, loans, and refinancing options. They specialize in providing loan assistance to churches and ministries.  Ministry loan offerings include:  

  • New Construction: New construction funds new buildings that allow churches to accommodate more members.  
  • Purchase: Purchase loans help churches buy real estate. 
  • Renovations: Renovation loans can help update the ministry.  
  • Refinancing: ACCU refinancing can help churches find more favorable loan terms. 

Churches that work with ACCU are eligible for organization membership which converts clients into stakeholders. Accounts are federally insured by the NCUA with added ASI protection Other special features and services include church loan consultations and a loan payment calculator.  

CDF Capital 

CDF Capital specializes in loans for churches and ministries. Since launching in 1953, they have made over 2000 loans, lent nearly 2 billion dollars, and helped over 1000 churches and ministries. Their church loan solutions include:  

  • Construction Loans: Construction loans help church building efforts.  
  • Purchase Loans: These loans assist churches with real estate purchases.  
  • Refinance: Refinance loans help churches take advantage of better loan rates.  
  • Bridge Loans: Bridge loans are helpful for short-term borrowing needs.  
  • Unsecured Loans: Unsecured loans do not require collateral. They typically support the purchase of technical equipment or soft land acquisition.  
  • Land Loans: Land loans are used to purchase undeveloped real estate.  
  • Lines of Credit: Lines of credit boost cash flow and are available when you need funds fast.  

Additional support and resources include CDF’s Spiritual Capital Prayer Team. Sign up online for ongoing newsletters. Their website also provides information on the Ex Summit, a place where peers and leaders meet to support a learning community.  

Honorable Mentions 

Here are some other reputable banks that offer church loans:  

  • Thrivent: Thrivent’s church loans offer competitive rates and low fees. They provide customized loans suited to your ministry needs. Clients get a dedicated team to oversee the loan process.  
  • Everence Federal Credit Union: Everence offers various financial services for churches. Their flexible loans include construction, refinancing, and lines of credit. The loans are funded by faith-based loan programs which align like-minded believers from the Everence community who wish to help grow the church and ministry through financial investments.  
  • WatersEdge Ministry Services: WatersEdge offers church loans with attractive terms and rates, low closing costs, no prepayment penalties, convenient online applications, minimal paperwork, and interest reinvested in kingdom causes. They provide loans for new construction, refinancing, remodeling, land acquisition, and small church loan programs.  
  • Cass Commercial Bank: Cass Commercial Bank supports various business financial needs including faith-based services. They have a history of lending to churches during difficult economic times. Thanks to their strong liquidity and capital position, Cass was lending in 2008 and 2009 when most banks were not.  
  • Emerging Capital Funding: EmCapFund specializes in church loans with rates as low as 5.85%. Lending options include refinancing, new construction, property purchase, building renovation, and bridge loans. They offer standard and fixed-rate loans to churches with very good credit.   

This video provides more information on navigating church loan programs: 

 

 

Steps to Apply for a Church Loan 

Nonprofit lending institutions require preparation before applying for loans. The steps include: 

Preparation 

  1. The church will require at least three years of financial records. Ensure you have them ready. Your accountant may be able to help with this step.  
  2. Know how much you can borrow. As a rule, churches can generally borrow 2 ½ to 3 ½ times their annual income. Banks tend to be careful about how much they lend as well. Generally, they will only lend about 70% of the property value.  
  3. Complete a capital fundraising campaign. Banks will typically ask about the success of your campaign in terms of how much money you raised and how many members donated. They want to know your church is supported by the community. They may also inquire whether your campaign was DIY or run by a professional organization. A DIY campaign typically raises 60% to 100% of the church's annual income while a professional campaign raises 1.5 to 2.5 times the annual income.  
  4. Work out a loan repayment plan. The lender will want to know how the church plans to repay the loan. Approval is more likely to occur if the church has a reserve of cash available.  
  5. Have a detailed construction plan. If the loan is being used towards construction or renovations, the lender will want to know if plans are in place, if the church chose a contractor, and how much the project will cost.  
  6. Know the type of loan you want. Your choices include fixed-rate and variable loans and secured and unsecured options. Consider the pros and cons of each to make your decision.  

Application Process 

Loan applications can be filled out in person or online. They will ask for your contact information, what type of loan you want, and what the loan is for. You will also be required to submit documentation such as:  

  • Financial statements like profit and loss reports 
  • Proof of individual income 
  • Bank statements 
  • Business and personal credit scores 
  • Personal identification documents 
  • Information about related entities like trusts and self-managed super funds 
  • Copy of relevant legal documents like contracts, leases, permits, licenses, and other items relevant to your operations 

Ensure you have these documents ready. Ask for help from your accountant to confirm their accuracy. Double-check information before it’s submitted to ensure it’s correct. Any inaccuracies can delay the process or increase the chances of rejection.  

Approval and Funding 

The church loan approval timeline varies wildly depending on the type of loan and amount of money you require and if you are financially prepared to repay the loan or require additional campaigning.  The approval may also be prolonged if third parties must be consulted for inspections, reports, title, work, etc.  

According to AG Financial, approval typically takes 30-45 days, and it takes an additional 30-45 days to get funded following approval. You can expedite the process by submitting all documentation with your application and staying in touch with the escrow company throughout the process.  

Watch this video for more helpful hints on the church loan application process: 

 

 

Tips to Securing the Best Loan Terms 

Every church wants the best loan terms possible. Here are some strategies that will ensure you get a loan you are happy with.  

Improving Financial Health 

  • Cash Flow Management: Churches should practice prudent cash flow management to take advantage of better loan terms. They should spread payment activity to ensure they always have cash on hand. Savings also make you look favorable to lenders.  
  • Debt Management: While churches may carry a bit of debt, excessive debt will look bad to a lender. Consider paying off and consolidating debt before applying for a loan.  
  • Donor Support: A lender will look at things like the number of giving units and the church’s fundraising history. The church may consider getting a few successful fundraisers under their belt before applying for a loan.  
  • Average Years a Pastor Has Served the Church: The financial institute will consider how long the pastor has served the church- and the longer the better. They will break the service down into categories of greater than 15 years, greater than 10, greater than 5, and less than 3. If your pastor is relatively new to the church, you may want to hold off on remodeling and construction plans.  

Negotiating with Lenders  

Here are some negotiating strategies that may help you get lower rates: 

  • Shop Around: Shop around with different lenders. Get estimates from them in writing. Ask each lender if they can beat the other lenders’ rates.  
  • Know Your Negotiable Fees: Negotiable fees include the underwriting or origination fee, the application fee, points, title services, home inspection and appraisal fees, and real estate agent commission (if applicable). See if your lender will reduce these fees for overall savings.  
  • Strengthen Your Application: A borrower with good financial health will have better bargaining power. Determine how to improve your credit to get some leverage.  
  • Ask About Bundle Deals: Some lenders may lower their rates if you invest in affiliated insurance or escrow services.  

Exploring Multiple Options 

Churches should shop around to see what different lenders are offering. This strategy provides more loan options and insight into which lenders offer the best value for the money. It can also serve as leverage if you ask a lender to beat another lender’s rates.  

Financial advisors and consultants can also with the lending process. They can recommend strategies so you can improve your financial health and get better rates. These experts may also be able to guide you to reputable lenders and tell you what to look for in a lender.  

 

 

Frequently Asked Questions 

What are the typical interest rates for church loans? 

Interest rates for church loans typically fall between 5% and 7%. However, rates will vary depending on the church’s credit history, the loan size and length, and the loan type.  

How long does the loan approval process take? 

The loan approval process can also vary depending on the type of loan and documents required. However, it typically takes 30-45 days to approve the loan and another 30-45 days for the loan to get funded.  

How can churches with limited credit history qualify for loans? 

Churches with limited credit history may find it difficult to qualify for a loan. An alternative lender may approve the organization despite minimal proof of income. However, these lenders are not ideal for nonprofits seeking low-interest church loans. They typically charge higher interest rates.  

What collateral is required for a church loan? 

The building and the land typically serve as collateral on a church loan. Therefore, if the church defaults on the loan, the lender will seize the property.  

What mistakes should you avoid when seeking a church loan?  

Common church loan mistakes include: 

  • Borrowing more than you can afford to repay- most experts recommend that you don’t spend more than 30% of your church’s income on debt 
  • Not having a clear purpose for the loan 
  • Choosing the wrong lender, i.e., a lender that charges excessive interest rates or doesn’t understand the church’s needs.  
  • Not providing complete documentation- failure to meet all lending criteria for churches could prolong the approval process 
  • Ignoring the terms and conditions: Be aware of the loan terms and repayment schedule to avoid a default 
  • Not involving church leadership: Discuss loan decisions with church leadership to ensure they agree with the terms.  
  • Not considering alternate funding options: Grants, donations and other fundraising initiatives may be more affordable church financing when compared to a loan.  

Learn more about church funding alternatives by watching this video:

 

 

Unlock the Secrets to Stewardship in the Catholic Church with a Free eBook!   

Keeping the lights on, the doors open and missions funded aren’t what inspired most church leaders to pick their careers, but they are key to the health of each church and congregation. Discover how to become a master of church stewardship with our ultimate guide.    

The Complete Guide to Church Stewardship

 

 

 

Related Posts

Related Posts