3 Essential Questions About Church Loans

While taking on a loan may seem like the furthest thing from a spiritual practice, the way your church answers the following questions can be. Here are 3 key questions to ask as a church body.

1. Where do our loan payments go?

While banks play an integral role in fueling the global economy, churches have other options when it comes to financing their facility needs.

Banks and other for-profit institutions have an obligation to maximize shareholder value, while 100% of BCLC’s net profits are placed into BCLC’s permanent fund, which is then lent out to more churches. This means that every interest dollar spent will be used to further the Kingdom.

2. What are our space needs and borrowing capacity?

It is important to work with a trusted resource to determine the appropriate amount of space and debt for your church before entering a lending agreement.

With decades of experience lending to churches alone, BCLC has learned how to help a church decide what amount of debt would be healthiest. Our vision is to help churches make good financial decisions, and we are driven by the motivation to honor God with our resources.

3. What is the structure of the loan?

Loans can be structured several different ways, but two of the most common ways are fully amortizing term notes and balloon notes. A balloon note is debt that matures (or is due) in typically 3 or 5 years.  Even though the debt is amortized over a 20-year period (i.e. the monthly payments are set up to pay off the debt over 20 years), the loan will balloon after 3 or 5, forcing the church to either pay off the entire remaining balance or refinance the loan.

Most churches will refinance the debt when it balloons, but with changing rate environments, the church can find itself in a less favorable interest rate structure than it had with the original loan.

Final Thoughts

At the end of the day, churches have the responsibility to seek a lender that aligns closely with their values and enables them to make the most of their Kingdom resources. BCLC focuses on the long-term spiritual and financial health of each church we consult. With 60+ years of experience in the ministry of church finance, we strive to provide wisdom and knowledge to God’s churches with regard to borrowing.  

“How much better to get wisdom than gold, to get insight rather than silver!” Proverbs 16:16