When professional sports teams consider acquiring new players, one major consideration is a prospect’s health. The same is true for lenders reviewing loan applications. They’re looking for healthy borrowers, those that can handle the prospective debt.
If you’re looking for a loan, how will lenders evaluate whether your organization is healthy enough to get one? Initially, they’ll ask a series of questions in five key areas:
Leadership: Is your organization led by a plurality of competent, trustworthy people who practice transparency and demonstrate a commitment to meeting the organization’s financial obligations? One indicator of this type of leadership is implementation of proper internal controls and financial oversight.
Liquidity: Does your organization consistently have adequate cash reserves and sufficient reserves to pay for routine facilities and maintenance expenses such as repaving parking lots and replacing air conditioners?
Cash management: Do you have an annual ministry plan, does your budget align with that plan and do you actively manage your budget to stick with your plan?
Cash flow: Do you manage expenses in such a way that your organization lives within its means? One indicator that this is true is consistently positive net income.
Debt: Does your leadership understand how much debt is too much? Can your historical financial performance justify taking on additional debt? Would a new loan negatively impact your ability to stay on mission?
Athletes who aren’t currently on a team roster still work hard to stay healthy and physically fit so they’re ready to play when a team calls. The same should be true for your ministry. Even if you’re not looking for a loan today, you want your organization to be financially healthy. Then, not only are you able to stay on mission, but you’ll also be ready to borrow when and if the need arises.
If you are looking for a ministry loan, you’ll want to work with a lender like ECCU who understands the unique nature of ministry finances.