• Many churches need financing for buying church property or doing renovations on an existing church property, so they may search for the best banks for church loans, apply for construction loans, or other types of church financing.
• While churches are considered nonprofit organizations, they are also considered high-risk, which means that getting a traditional business loan can be difficult.
• Alternative lenders may be the best route for a church to secure financing.

What Is a Church Loan?

A church loan is any financing that a religious or faith-based organization (including Christian, Jewish, Muslim, or other religious groups) takes out to help with the cost of building, maintaining, renovating, expanding, or refinancing a property. A church loan may also be used to get cash to help improve cash flow and cover daily expenses of running a religious organization.

In general, faith-based organizations and churches are nonprofits, which means that they are tax-exempt and receive other benefits. Typically a church will receive funding from tithes or offerings from constituents as well as grants or other financing from their overarching religious affiliations. They may also receive money in the form of tuition for a church-run school, camp, after school program, or renting the property out for secular meetings and events. 

However, the cost of maintaining a property may be more than a church makes from its attendees’ tithing or other income sources. In this case, the church or faith-based organization may decide to seek out a church loan. 

Can Churches Take Out Business Loans?

Churches and faith-based organizations can take out small business loans, including those offered by the Small Business Administration (SBA). Because they are usually nonprofit organizations, churches may have better luck getting a business loan meant for a nonprofit as opposed to a traditional business loan. 

Because churches are considered high-risk organizations, it may be difficult to find a business loan from a traditional bank or financial institution. There are many faith-based financial institutions that loan specifically to churches and other faith-based organizations. Alternative lenders may also be more likely to loan to a church or faith-based organization, although these loans can come with strings attached like higher interest rates, shorter terms, or a longer loan process including more paperwork. 

A church may consider business credit cards or a business line of credit to help manage daily expenses or smaller financing amounts. These are typically easier to qualify for, and you only pay interest on the money that you spend, rather than a chunk of money all at once. 

Types of Church Loans

There are several types of church loans you can apply for when you’re looking for financing for your church. Here are the most common options:

• Mortgages
• Construction loans
• Nonprofit business loans
• Faith-based financial institutions
• Alternative loans
• Business lines of credit
• Business credit cards

The type of financing that works for your business depends on factors like the purpose of the funding (building a new church vs. paying for minor repairs), how much you need to borrow, and how quickly you need the money. 

Regulatory Requirements for Church Loans

Church loans are different than other types of business financing in what they require the applicant to submit. Here are the basic requirements when applying for a church loan:

• Three years of financial statements, like balance sheets and income statements
• History of the church, like the denomination, background, and location(s)
• Church leaders’ biographies
• Information on church leadership
• Value of property, if applicable
• Resolution that allows church leaders to apply for funding
• Budget for project
• The constitution and bylaws of the church
• Survey and valuation of property
• Total of church’s giving units

Lenders That Specialize in Church Loans

There are lenders that focus on giving out financing to churches and other religious institutions. They fill in the gap where traditional banks are less willing to lend to religious organizations. Because these lenders specialize in church financing programs, they are more aware of the funding needs of a church, which may mean a simpler application process. 

The interest rates you get from these lenders may be higher than other options, so it’s always a good idea to shop around for your best option.

Where to Find Church Loans

Finding a church loan may be somewhat more difficult than a traditional real estate loan or other type of financing, but there are many institutions that cater specifically to religious organizations. If your church has an existing relationship with a bank or credit union for your day-to-day financial workings, it’s best to look to them first and see what they may be able to offer. 

Business loans for nonprofits can be an excellent place to look for a church loan. A church that is trying to renovate an existing building, expand a place of worship, or even buy real estate to build a new church may be able to qualify for a commercial real estate loan. Some that cater specifically to non profits include:

• Lendonate
• Bridgeway Capital
• SmartBiz

Many traditional banks and financial institutions offer loan programs for church lending for places of worship and faith-based institutions, including:

• AGFinancial
• Union Bank & Trust
• Thrivent

There are also faith-based lending institutions that cater specifically to churches, such as:

• Griffin Church Loans
• BCLC Church Loans
• UIF Islamic Financing Solutions
• Christian Community Credit Union

Alternative lenders who offer short-term business loans may be a good solution for a church or faith-based organization that has trouble finding other sources of financing, especially if they have bad business credit or don’t have a long enough financial history to qualify for traditional loans. Some short-term lenders include:

• Kiva
• Nonprofit Finance Fund
• OnDeck
• Credibly

Do Churches Have Mortgages?

Many churches and places of worship do have mortgage loans, because real estate is expensive, even for churches. Most religious institutions will have fundraising drives among their communities or constituents to help pay for big expenses like new church buildings, but they may still need major financing to pay for a new property or renovation. 

Uses for Church Loans

A church or faith-based organization can use a church loan for a number of reasons, including:

• New church construction
• Expanding an existing church building
• Renovations on an existing church building
• To refinance an existing mortgage and get cash for day-to-day expenses or other purposes
• Expanding church programs and outreach
• Adding a school or camp functionality to church infrastructure
• Improving accessibility of an existing church structure for members

How Do You Get a Loan for a Church?

The loan options available for churches can depend on your location, financial status, down payment, available collateral, and much more. Some basic steps before signing onto a loan include:

• Do your research — Don’t just take a loan from the first lender that you come across. Make sure that the bank or financial institution has your best interests in mind and that their loan programs match your church’s needs. Look for competitive rates, specific loan programs that meet your church’s unique needs, and make sure your lender is a Member FDIC. Also, beware of balloon payments, which may make you refinance your loan every three years to five years whether you need it or not. 
• Know your credit score — Know your credit score — Your business credit scores are one way a financial institution will determine whether or not you qualify for a loan. You can learn your business credit score and ways to improve it with an account from Nav.
• Gather your financial information — Just because you’re a religious organization doesn’t mean a bank is going to take your word for how financially sound you are on your loan application. You’ll need to know your income from all sources, including tithing, renting, and tuition payments, as well as any debt you have, such as an existing loan. 

How Much Can a Church Borrow?

The loan amount a church can borrow depends on several factors, including:

• Business credit
• Time in business 
• Financials including income from tithes, offering, tuition, rent, and other sources
• Which lender you select

In general, a religious organization or church can borrow up to four times the gross income from tithes and offerings. Many financial advisors also recommend that you not spend more than 30% of your church’s income on debt payments for a mortgage or other loan, just as you would budget for a personal home mortgage payment. Since tithes and offerings can be cyclical in nature and not necessarily the same from month to month, having a good idea of your yearly income over time can help you calculate these numbers.

Getting a loan for your church or religious institution can help you build a place of worship or improve your existing structures. Nav can help you do the research to find loans that you qualify for by tracking your business credit and other factors. Use Nav to get started today.