Uptick on lending to churches?
More congregations may be ready to take the plunge on big projects
Where do churches turn when they need to borrow money? Two big lenders to congregations both report 2012 upticks in activity — suggesting churches may be returning to projects delayed earlier by the troubled economy.
Neither the Evangelical Lutheran Church in America’s Mission Investment Fund (MIF) nor the Lutheran Church—Missouri Synod’s Lutheran Church Extension Fund (LCEF) have released their latest numbers, but both acknowledge heightened interest this calendar year.
“During the troubled economy, congregations scaled back their plans to build,” says David Dalton, based in Chicago as vice president for the Mission Investment Fund. “We’re seeing increased interest now. Congregations are contacting us. They’re feeling more comfortable with capital projects.”
Fuhr says he works with congregations for up to five years before processing an actual loan request.
Such funds typically lend for bricks and mortar projects — buying land, fixing a boiler, and the like, as well as refinancing existing church loans. Some loan proceeds may find their way into paying day-to-day expenses, but only in cases in which the mission is promising.
“We are a business,” says Dalton. “We are strict in our own ways. We have very stringent guidelines to make sure congregations are taking on loans in amounts they can afford.”
Adds Kurt Fuhr, LCEF vice president for the Minnesota South District: “We’re in a position to lend when a congregation is in a position to repay a loan in a mission-minded way.”
Church and economy
Churches do track the economy in terms of borrowing. ELCA’s churchwide Mission Investment Fund’s total loan balance rose to $471 million in 2009, then slipped to $465 million in 2010 and $458 million last year. Now, says ELCA’s Dalton, the fund has seen an uptick in demand, though he declines to specify the most recent numbers.
Meanwhile, on a regional scale, the Missouri Synod’s Minnesota South District’s loan portfolio nearly doubled in volume from $30 million in the decade after 1998 before declining slightly to $55 million in 2011. Nevertheless, it appears to be bumping up again.
Due diligence — and the Holy Spirit
This is about business. Congregational leaders seeking a loan must expect to encounter the same due diligence they would at a neighborhood bank.
On the other hand, church-fund lenders acknowledge the ways of the Holy Spirit. A key difference between church lending and other commercial lending is risk tolerance. Church lenders accept more risk. Commercial bankers may shy away from the awful truth about revenue that church treasurers face all year: Any congregation, notes ELCA’s Dalton, is “not certain how much is going to come in every week.”
Both the ELCA’s MIF and Missouri’s LCEF lend to support specialized ministries and new mission starts as well as existing congregations. Interest rates are typically low: at LCEF, 2.5 percent for specialized ministries, 4.125 percent for startup congregations, and 4.5 percent for existing congregations.
Fuhr of LCEF says its typical loan comes with a variable rate and a 20-year term. Naturally, church leaders are business-savvy. “More churches now ask about five- and 10-year fixed-rate loans, Fuhr points out, “so they can lock in their rates because they anticipate higher interest rates in the future.”
LCEF lends only to Missouri Synod churches, of course. Fuhr says he works with congregations for up to five years before processing an actual loan request. He provides and interprets demographic data to help congregations discern their neighborhood and mission — “and give them a sense of their loan capacity in advance,” he adds.
Borrowing congregations must understand that they need a ministry plan — “for how a church will reach more people for Christ as they make a loan request,” says Fuhr, “[and] why are they wanting to remodel and build.”
The application process guides a congregation on whether it can afford the loan. If monthly payments are more than lenders believe a church can afford, the loan may be a no-go — but it may never get to an out-and-out refusal.
“If it’s more costly than they can afford and will have a negative impact on ministry,” says Dalton, he may nudge an applicant congregation toward discerning another way to use its resources — an outreach ministry, for example.
If a congregation is too financially strapped to borrow, it may be guided to a different set of resources in the church denomination.
In short, if you need cash, get ready for a nudge, toward growth, toward mission — or toward something you might never even have thought about.
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Tags: commercial banks, congregations, David Dalton, ELCA, Evangelical Lutheran Church in America, Kurt Fuhr, LCEF, LCMS, loan balance, loan portfolio, Lutheran Church Extension Fund, Lutheran Church-Missouri Synod, MIF, Minnesota South District, Mission Investment Fund, specialized ministry