Sitting Across the Table From a Lender

7 Things Lead Pastors Don't Like to Do · Part 3

Sitting Across the Table From a Lender

The first time I sat across the table from a lender on behalf of a church, I was certain I was about to be found out. I had the financial statements in a folder and a knot in my stomach. It felt like an exam I had not studied for, given by someone who already knew the answer.

I was wrong about that meeting, though it took me years and a few hard lessons to understand why. I went on to chair a $25 million relocation and to move a church out of an old bond debt into conventional financing, and somewhere along the way the lender's table stopped being a place I feared. Not because I got smarter. Because I finally understood what the person on the other side was actually after.

A lender is not there to judge you, and they are not there to fund a dream on faith alone. They are trying to answer one question, and only one. Will this loan be repaid. The numbers help them answer it. So do you.

A Lender Is Buying One Thing: Confidence It Will Be Repaid

Strip away the paperwork and a church loan comes down to that single question. Will this money come back. Every document they request and every ratio they run is a different way of getting at it.

Knowing this changes how you prepare. You are not there to sell a vision to a skeptic or to prove your church deserves a yes. You are there to give a careful person enough reason to be confident the loan will be repaid. Some of that reason sits on the page. Some of it sits in your chair.

The Numbers Carry Part of the Argument

Part of that confidence comes from a handful of numbers, and you should know them before anyone runs them for you.

The first is coverage. After expenses, lenders want to see the church clear its proposed payment with a little room left over, often around $1.10 of income for every $1 of new payment. If the income will not cover the payment, the conversation ends before it begins.

The second is share of income. Most want the loan payment to take no more than about a third of what the church brings in, so that ministry, staff, and the building itself still have room to breathe.

The third is capacity. As a working rule, a church can carry total debt of three to four times its annual general revenue. A church receiving $500,000 a year is looking at a realistic ceiling near $1.5 to $2 million, not the larger figure the building committee fell in love with.

The last is the property. Lenders typically finance 65 to 80 percent of an appraisal, and they appraise church buildings conservatively, because a sanctuary has a short list of future buyers. The church brings the rest.

Walk in already fluent in these numbers. Knowing them cold does more for a lender's confidence than any promise you could make.

The Rest of the Argument Is You

Here is the part the ratios cannot show, and the part most pastors underestimate. The numbers tell a lender whether repayment is possible. You tell them whether it is likely.

A loan officer is, in the end, deciding whether to believe in the church across the table, and much of that belief rests on the lead pastor. Is the vision clear enough that a stranger could repeat it back. Has the pastor been here long enough, and committed enough, to still be here when the final payment is made. Does the congregation believe in the project enough to give toward it, which is why real pledges and a healthy campaign strengthen a request far more than optimism does. Lenders weigh how long a pastor has served, because leadership stability is part of the collateral in their eyes.

This is the half of the meeting you actually control. You cannot change last year's giving by Friday, but you can walk in clear about the vision, honest about the risks, and visibly committed to carrying the project to the end. A lender can fund a set of numbers. What they are really looking for is a leader they can believe in.

Bring Both Halves

So do the arithmetic before you walk in, not during. Know your coverage, your share of income, your capacity, and the value of what you are pledging. But do not mistake the math for the meeting. The numbers get you into the room. What earns the yes is a lender becoming confident, partly from the page and partly from you, that the church will do what it says.

A lender is really deciding two things at once: whether the math works, and whether they believe in you. Walk in ready for both, and the table you dreaded becomes a conversation between two people who want the same thing.

Kerry Jones is the founder and CEO of Healthy Church CFO, a firm providing fractional CFO services to the local church. He has served churches as both pastor and CFO for more than 30 years.