Is Now the Time to Build or Buy?

(Originally published as an article within ECCU’s former e-publication, Ministry Banking Today.)

With all the news of economic meltdowns and bailouts, it’s hard to sort out the realities of financing. If you’re one of the many growing ministries weighing your options for expansion, current economic conditions have probably complicated matters for you. Here are a few of the tougher questions about financing and some answers to help guide your decision-making.

What do I need to know about getting a loan?

The bottom line: Finding a lender today is likely to be a challenge. While financing options are certainly out there, most loans will take longer, be more expensive, and have less favorable terms than what you’ve experienced in the past. Mark Johnson, an executive vice president with Evangelical Christian Credit Union (ECCU), encourages ministries to think long and hard before seeking financing.

“We are asking ministries the hard questions—to reevaluate if this really is the best time for them to build or buy,” Johnson says. “Because of current economic conditions—and for the long-term benefit of the ministry—it is a good idea to reassess the timing, need, and size of the project. Ministries should give careful thought as to whether they will be able to generate the funds to meet loan requirements.”

Why are lending requirements so tight?

In the wake of the sub-prime meltdown, a couple key factors are causing lenders’ purse strings to tighten:

  • Some banks have suffered losses and are now trying to build a higher quality portfolio. The safest thing for them to do is to strengthen their cash position—meaning less lending and more cash reserves.

  • Lenders are simply restricted in the amount they can loan out. Sources of funding are not as readily available. Once-willing investors and participants are now faced with their own economic challenges and have little additional funding for loans. As funds available for lending are limited, credit standards tighten and fewer ministries qualify for financing.

How do we decide?

As you prayerfully consider your options for expansion, seek wisdom and guidance from a trusted financial expert. “The need for sound financial management becomes even more critical for ministries in challenging economic times,” says Johnson. “Seek out a lending team that’s willing to spend a good deal of time consulting on the principles of cash management, liquidity, and the implications of less predictable cash flow.” By carefully assessing these areas of your ministry, you will be better equipped to determine if you are prepared to build or buy in today’s market.

Next month Ministry Banking Today will look at alternatives to financing and how churches like yours are adapting to economic changes.

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