Although they are nonprofit organizations, churches have the same financial needs as any other type of business. These needs can include paying staff, making improvements, expanding services, and maintaining existing facilities. Sometimes, these ongoing expenses require more funds than you have on hand. When this happens, a church loan can provide the cash you need to make improvements.

The offerings and fundraisers that generate the majority of church revenue may be enough to maintain normal operations, but what happens when you need more cash than you have available? Churches have many options for securing loans, but some have advantages over others.


Why Get a Church Loan?

From responding to a crisis to planning for the future, a church loan can be used for a variety of reasons. 


Churches are built to last multiple generations, but work doesn’t stop after construction is complete. Regular maintenance is important for the longevity of churches, and maintaining the existing building and surrounding property requires money. Putting these types of projects off because of a lack of funds can lead to a more costly undertaking down the road. 


Water or fire damage cannot be ignored, and the faster the repair happens, the less potential there is for the damage to spread, especially in the case of leaks. For example, roof work to repair damage or prevent future leaks is a worthwhile investment that can prevent future costs. It’s difficult to plan for unforeseen repairs after a hurricane, earthquake, tornado, or other natural disaster, which is why it’s so important for churches to identify sources of funds before disaster strikes. 


Church members want to be comfortable in their surroundings, which is why it’s important to periodically update old buildings. Safety and code issues may also require you to modernize facilities, including plumbing and electrical. Long-term fundraising is a great way to get money for renovations, but you may need a loan to fill the gap or cover unexpected expenses that arise during renovation. It’s not uncommon for cost estimates to change in the middle of a project as additional issues are uncovered. 


A growing congregation is every church’s dream, but when attendance outgrows the existing facilities, you need money for expansion to accommodate a larger community. Securing a church loan allows you to add community rooms, offices, educational facilities, gyms, and other spaces to meet members’ needs.  


An upcoming balloon payment or reconciliation of a line of credit can be stressful, and organizing a fundraiser takes time and resources. A bridge loan can help cover the gap while you determine the best path forward for reducing debt.

Have you been turned down for a bank loan? Find out why commercial real estate  lenders are turning to hard-money loans ➤


Church Loan Options

When the needs of the church exceed the amount of cash you have on hand, securing church financing may be the best solution. Fortunately, churches have multiple options. 

Government Grants

Government grants are a great option for planning future projects. The main advantage of this type of financing is that you don’t have to pay the money back. However, the main disadvantage is that grant applications take time, and there is no guarantee your project will be awarded with the funds you need to move forward. With a limited amount of funds to award, grants can also be quite competitive. Having official 501(c)(3) nonprofit status is often a requirement to secure a government grant. 

If you need money quickly, a grant is probably not the way to go. But when you have a long timeline and the consequences of delays are not significant, grants could be a good option. It’s also a good idea to have a backup plan in case your grant application is not successful, especially if you are funding an essential project. 

Bank Loans

Many conventional banks provide loans to churches and other types of nonprofits. Again, having official nonprofit status is essential for getting this type of funding. Most banks require collateral or a personal guarantee when approving church loans, and the approval process can be quite lengthy. You’ll need to provide a significant amount of documentation that will be under heavy scrutiny. Getting a church loan is much more onerous than getting a typical mortgage, and the process is sometimes even more rigorous than getting a commercial loan. 

Plan on the process taking at least a month, and know that it sometimes takes several months. Build in time to compile all of the requested documentation, which might include:

  • Operating budgets
  • Financial statements
  • Bank statements
  • Summary of outstanding debt
  • Project budgets
  • Church bylaws
  • Donation reports
  • Leadership structure and bios
  • Membership demographic information

If you’re funding a real estate project, you should also plan to have a survey, real estate contract, title policy, and appraisal prior to closing. 

Although the process is complex and time-consuming, if you don’t urgently need cash, it may be worth it to get the relatively low interest rates conventional banks can offer. However, if you need cash fast, a bank loan may not be able to meet your needs. 

Private Money Loans

Private money lenders have much more freedom than most other providers when it comes to providing church loans. For example, official nonprofit status is not a requirement when working with a hard money lender. Loan approval is based on the value of the property—not on financial statements or other factors that traditional banks require—and a personal guarantee is not necessary.

Because much less documentation is required, the hard money loan process moves much more quickly. In fact, you may be able to secure a private money loan in as few as five days. When a building is damaged or your space needs suddenly change, the ability to move quickly is essential. A private money lender can help you get a church loan fast.


Church Loans Through Socotra Capital

Socotra Capital is a hard money lender that provides financing to individuals, businesses, and nonprofit organizations, including churches. Depending on your needs, we offer cash-out refinancing, bailout loans, and real estate loans

Our primary advantage is quick closing times when necessary. If your planned financing falls through, you have another loan coming due, or an emergency occurs and you need cash fast, Socotra Capital is here to help.

To learn more about hard money loans and the benefits of getting one for your church, read The Borrower’s Guide: Process, Preparedness, and Timeline.

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