Real Estate World

Link: http://www.bloglines.com/blog/SteveBush

Church Loan Obstacle Number Two: Commercial lenders usually require individual guarantors for church financing, and this is inappropriate for a church loan. The financial and legal structure of churches is at odds with a traditional lender/guarantor agreement. Many commercial lenders are not comfortable with the potential lack of individual guarantors because of the difficulty of reselling the church property if negative financial circumstances occur in the future.

Church Loan Obstacle Number Three: When a church loan is approved, there are often onerous terms such as not enough financing, short-term loans, low loan-to-value (LTV) of 50% to 60% and high interest rates. These unacceptable terms are similar to the church financing being disapproved, and if the terms are accepted, the church might experience financial problems due to the commercial mortgage loan conditions.

It is unfortunately very common for church financing to have been secured only after church members have authorized an individual guarantee for church financing. The need for individual guarantors acts as a serious barrier first because church members might be unwilling to do so and second because there might not be individuals who have enough financial resources to provide an individual guarantee for larger church financing needs.