There are times in the life of a church when a loan can help you take advantage of opportunities or provide solutions to specific problems. It could be that a new building has opened up in town that could help accommodate your growing congregation. Or maybe your church needs to refinance some loans it has taken on in the past.
While in specific instances, you want to be sure you have thought through your options. Here are some questions you want to ask before taking on a loan.
1. Is This Debt Necessary?
A loan is a legitimate option in many scenarios, but it is not always the best solution. It is critical that a church considers all the options available, which means spending time researching alternatives and weighing pros and cons. Too often, a loan can be a shortcut to this process.
If your church is beginning to outgrow your current space, taking out a loan to expand your existing facilities is only one potential option. You want to be prayerful (and creative). Is this a problem that can be solved by multiple services, multisite meetings, or any number of alternatives? A loan is a suitable choice when you are confident that it is the best one.
2. Can We Handle This Debt?
When considering debt, it is critical to think beyond whether you can afford a specific payment. You need to factor in the opportunity cost as well. You might be able to make the payments on a loan for a larger building, but what happens when you cannot afford the outreach and ministries that will attract people to fill it?
As stewards, churches need to be careful not to commit themselves in a way that will consume future resources. A loan can be a helpful tool, provided it does not use up funds that will zap future ministry and growth opportunities.
3. Are We Stable Enough for a Loan?
A church's income is not static. It rises and falls based on a number of factors. It is dangerous to decide whether to borrow money based on a snapshot of your current giving. Take a look at your giving over a couple of years and see how stable and consistent it has been. Has attendance and growth been steady? Are there months throughout the year when making payments has been difficult?
4. Does This Lender Specialize in Church Loans?
When it comes to churches, every lender is not created equally. Churches have unique needs and considerations, and you do not want to get into a long-term relationship with a lender that does not have your well-being in mind. You also want to be sure that the interest you are paying is not being invested in ways you cannot support.
Whenever possible, consider choosing a lender that specializes in church loans. Those that are used to working with churches know the right questions to ask and are focused on ensuring a church’s future success—not just their bottom line.
A loan can be a helpful tool
A loan might be an ideal and strategic tool to move your church into your next growth phase. It is essential that you do not rush into it too quickly. Think through all of your options before moving forward. If you want some guidance, consider reaching out to CDF Capital. We have been helping churches grow for 65 years, and we would be happy to help you decide if a loan is right for you.