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Dear Good Stewards: Please Don’t Miss this Opportunity to Refinance Your Debt
Churches who have utilized debt to meet the physical plant needs of their growing congregations should be alerted to the recent decline in interest rates. As tough economic times have pressed in, many churches are reporting both increasing worship attendance and slight declines in contributions. As churches attempt to manage their budgets to these circumstances, refinancing provides a simple yet potentially very significant source of expense reduction. Church leaders are currently faced with both a great opportunity and a daunting challenge. The current economic circumstances bring unprecedented opportunity for community outreach, evangelism and membership growth. Yet at the same time, many church budgets are strained. For churches with debt, reducing interest expense should be the top fiscal priority. We may be at, or near, the bottom of an interest rate cycle which has availed borrowers the lowest rates in history. The Federal Government is attempting to stimulate the economy with massive spending. Most economists agree this will eventually lead to an increasing rate of inflation. Higher interest rates will naturally follow. It is alarming how few churches seem to be focused on this opportunity. The telephones at banks should be ringing off of the wall. Perhaps Church Business Administrators and board members assume banks are not willing to lend in the current environment. While this may be true of some institutions, there are still a number of banks which are well capitalized and strong, a result of their careful management and prudent underwriting standards.
Even
if your loan does not mature for another 2 or 3 years, or if you
face a prepayment penalty, you should call a bank and examine the
possible benefits of refinancing. It won’t cost anything to have
the discussion but it may cost your ministry a considerable amount
if you do not. For example, only 30 months ago interest rates were
3% higher than they are today. When refinancing at only a 1% lower
rate, a church with a $3,000,000 debt can reduce their annual
interest expense by over $100,000.
Recently, some lenders have offered five-year fixed rates below 6%, and 10 year-fixed rates below 6.5%. So Dear Business Administrators please pick up the phone and call a healthy church lending institution today. Now is the time. A few hours of your time may prove a great benefit to your ministry. Dan Mikes is Executive Vice President and National Manager of the church and school banking divisions, Bank of the West, Walnut Creek, CA. 1-800-405-2327 churchloan@bankofthewest.com |
