This wraps up a series of posts on ratios a lender looks at when considering whether to make a loan to a church. The series started here. Just a few thoughts.
The recession has hurt giving levels at most churches. The financial health of the balance sheet has suffered as well.
Meeting the debt coverage, loan-to-value, and debt to income ratios is difficult for a lot of churches. The numbers I made up for an illustration put the church in the gray area on most of the calculations. The made-up numbers probably reflect a church that is healthier than where most churches are today.
How your church stacks up in comparison to the ratios required by lenders is going to be a major factor in whether you can qualify for a loan.
A comment I heard from several lenders was that their institution was making loans…..to churches that qualify. Ouch. If you clear those three hurdles (LTV, debt:income, DCR) then they will talk.
If you know how to calculate those ratios, you can figure out for yourself what your lender will see when they look at your financial statements.
I hope that this series of posts has provided background on ratios that lenders are using and what those calculations look like. If you need help interpreting your own financial information before you talk to a lender, call your CPA or any CPA listed at the CLA or ECFA website.