While it can be difficult for a church -- or anyone, for that matter -- to obtain funding in the current economy, it's not impossible. Worship Facilities Magazine staff spoke with Bank of the West's (BOW's) Mark Thomas last weekend at the 55th annual National Association of Church Business Administration (NACBA) conference and tradeshow in Washington, D.C. Here are some interesting tidbits both from that conversation and from a conference session, "Church Loan Solutions & Cash Management," presented by Thomas and Peggy Morris, BOW cash management specialist.
* Planning your project -- Thomas reports that lenders like to know that the planning and decision team includes both elements of vision and of business management (both "Art" and "Science"); Thomas says that the contractor and other project vendors should not be part of the decision team to avoid conflict of interest concerns.
* How much building can you afford -- and how much debt? -- A maximum debt limit should be identified, Thomas reports, as well as a reasonable pledge target -- "One and a half is reasonable in today's marketplace," Thomas says, while 2x revenue is considered very good. He also says it's crucial for church leaders to review and develop a summary of past financial performance -- a critical piece of information for a potential lender.
* Capital campaign considerations -- While BOW does not handle capital campaigns, Thomas reports that he has noted a decrease in internally orchestrated capital campaigns and an increase in professionally orchestrated campaigns from pledges to receipts. He advises churches to work with professionals to see measurable results.
* Preliminary application information -- Churches need to get their ducks in a row to talk seriously with a lender. These "ducks" should include a brief history of the church (year founded, denomination, if any); background on senior pastor and administrative staff; list of ministries, missions, and community outreach programs; general description of the decision to incur debt; and a current and three-year history of average adult worship attendance. Other preliminary information to pull together should include 3-5 years of financial statements; balance sheets; an income and expense statement; and explanation of any significant variances from year to year. And a final critical component: a description of the proposed project.
Those sitting in on Thomas's NACBA session could understand, early on, what he meant about the combination of art and science that churches need to understand and deliver when applying for a construction loan. To find out more about the art vs. the science of applying for a church construction loan, keep an eye on Worship Facilities Magazine in 2012 for finance features addressing these topics.
