Is your church planning a building project? You’ve probably already run into a few unexpected snags. First, perhaps a decline in church attendance has made a dent in your weekly offerings. That means you’re dealing with a lower operating income. Lower donations can also affect your plans to raise money for the project.
Second, finding quality builders can be tough in a growing economy. And third, fewer financial institutions are offering construction loans these days, making it hard for churches to find loans for their projects.
If your church wants to build now, it needs to be in the best possible position for funding. That means thinking about the loan from the lender’s point of view. There are some conditions and practices that add risk to loans. And lenders want to eliminate as much risk as possible.
Construction loans are a special case because they involve two big kinds of risk. They involve risk first of all in the chance that a borrower might default in their payment. They also carry a second kind of risk: that the project won’t be done on time and under budget. So any church that can understand and reduce these risks will be in a stronger position to borrow. Here are five risk areas that churches can work on before requesting a loan. We’ll call them “danger zones.”
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