9 Tips for Brokering Church Loans

Although a large part of the country and pockets of the overseas market are mired in a residential real estate market crisis, there are still very viable opportunities in selected commercial markets for those who are resourceful. As a broker, you just need to think outside the box and get busy. The following provides some tips for brokering church loans put together from years ago that still have credence today.

1. Financials - Work with a church that has at least three years of historical financials. Incomplete bookkeeping is the primary obstacle to brokering church financing. That spells opportunity for a broker who can overcome this hurdle.

2. Church Income - Generally, you'll want to look for churches whose request for debt does not exceed 3-4 times the church's annual income. That's been the industry standard for years although requirements have tightened significantly in recent years.

3. Property Value - The first mortgage should not exceed 60% of the value. Check with your trade organization or local regulatory commission.

4. Number Years in Business. - Work with a church that is at least five years old. Established churches are far more likely to have kept adequate financial records, "Breakaway" churches from large parishes are also a good bet; Although the church is new, it retains the stability of its parent church. Churches still headed by the founding pastor are even better.

5. Looks Count - Affiliate with a church that has maintained its facilities. Lenders are not willing to put money into graffiti-strewn store front churches. Lenders usually require at three or four color photographs of the property and these photos can be an effective selling point. Photographs should show the altar, front of the building and parking lot. The fourth photo can show whichever angle the church considers most attractive. Lenders will also require documentation including title insurance, an appraisal, articles of incorporation and bylaws.

6. Target Large Congregations- The larger the congregation, the better. That's because churches with less than 150 people attending serviceseach week usually can't afford to make the loan payments.

7. Get a Church History - Just as in other commercial real estate transactions, lenders like to know "the story" behind the properties that they're working with. Ask the church's historian, or the oldest or most active members to write up a quick synopsis of the church's history. It should include when it was founded, former pastors, where they've been located, and their denomination.

8. Watch Out For Litigation - Watch out for litigation against the church, mechanics' liens, or any other kind of legal problem. The church may have a strong good income, but if it is suing its construction contractor, for example, you may find yourself out of a commission.

9. Look toward Leasing - Take advantage of an increasing demand for church furniture and equipment leasing. Typical equipment includes chairs for the newer worship centers, stationary pews, air conditioning units, fans, office furnishings and photocopiers. Audio, visual and sound systems are also popular.