'What's Best For The Church?' It's a function of Risk and Cost: how long the church needs to borrow the money, how long the fixed interest rate, and the related fees. I started my church finance career as a bank lender. Then, I founded and operated a consulting firm where I acted like a church's temporary Chief Financial Officer to structure and arrange the best financing, whatever the strategy. Now, I am a licensed securities Registered Representative and help churches with financing through bond issues and commercial loans. As an both an employee of financing sources and as an advisor to church clients, I have worked with just about every strategy to finance church real estate. I am not biased towards loans or bonds; they are both fine ways to do it. I want what is best for any church.
Experience tells me that loans account for about 80-85% of church financing and bonds about 15-20%. I believe most church financing is with a loan from a bank local to the church. I think the bonds percentage would be higher if more churches understood bonds.
The primary thing to consider is Interest Rate Risk. If a church needs to borrow money for 5 years or less, i.e. will really pay the credit off within 5 years, it's an 80% right answer to use a loan because bank and non-bank lenders will usually fix the interest rate for this period of time with relative low fees. If borrowing for 10 years or more, it's an 80% right answer to use bonds because of the fixed interest rates up to 25 years. If borrowing for 5-10 years, it's a toss up which is best; running the numbers on the costs of each and assessing the risks should provide the answer. While rare, sometimes a lender will fix their rate for longer than 5 years. If so, closely compare this option to bonds, line by line, fee by fee, interest rate by interest rate, in order to make your decision.
Experience tells me that loans account for about 80-85% of church financing and bonds about 15-20%. I believe most church financing is with a loan from a bank local to the church. I think the bonds percentage would be higher if more churches understood bonds.
The primary thing to consider is Interest Rate Risk. If a church needs to borrow money for 5 years or less, i.e. will really pay the credit off within 5 years, it's an 80% right answer to use a loan because bank and non-bank lenders will usually fix the interest rate for this period of time with relative low fees. If borrowing for 10 years or more, it's an 80% right answer to use bonds because of the fixed interest rates up to 25 years. If borrowing for 5-10 years, it's a toss up which is best; running the numbers on the costs of each and assessing the risks should provide the answer. While rare, sometimes a lender will fix their rate for longer than 5 years. If so, closely compare this option to bonds, line by line, fee by fee, interest rate by interest rate, in order to make your decision.
2 comments:
Its a matter when your church have old look in modern life. Church mortgage will help you for changing look or re-build your church.
If your church needs some reconstruction and you needs some finance to do this then you can take church loans. There are so many church mortgages where you will find the best church loans with low interest.
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