Church Line of Credit: How to Use It

Why do most organizations automatically apply for a bank loan to get them through a cash-flow rough patch when a church line of credit could better fit their needs? The reasons we most often hear vary from “that’s how we’ve always done it” to not understanding how a church line of credit works. Here’s what to know about why a line of credit for a church does the job to meet most money demands, how applying for a church line of credit is more manageable and takes less time, and how church financing with a line of credit makes sense for your faith-based nonprofit.

Why Does a Church Need a Line of Credit?

While most churches depend on the generosity of church member offerings and community-based fundraisers to support the organization’s needs, it isn’t always enough. Like all businesses, churches have seasonal highs (when money is plentiful) and lows (when money is tight). Unfortunately, having extra money on hand isn’t always possible, especially in a stressed-out, volatile economy. Fortunately, there are banks and specialty lenders available that issue loans to churches. However, in most cases, the loan application requires a large amount of backup documentation and a specific reason for the loan.

Lenders typically require some or all of the following:

• Existing and forecasted budgets
• Financial statements such as balance sheets
• Bank statements
• Two to three years of tax returns
• Renovation budget details and plans
• Project budget
• Church articles of incorporation and bylaws
• Mission statement and giving report
• Leadership organization structure and contact information

On the other hand, a church line of credit can provide an ongoing source of money whenever you need it, which comes in handy for those times when cash flow is low or is even negative. A church line of credit is considered a revolving line, which means, once the organization receives a preapproved amount, the money is always available to the church. The church can access the entire amount or just a portion, and fees are only charged on the money that has been withdrawn.

Revolving credit means once the withdrawn money has been repaid, the money is available again for withdrawal—all without the time-consuming process of reapplying for a loan.

Uses for a Church Line of Credit Loan

Unlike a traditional loan, where you need a specific reason for the money, a church line of credit can be used for everyday operating expenses, unplanned repairs, or even payroll. Studies show churches spend most of their budgets on personnel wages (49%), followed by building maintenance (23%). Other expenses include missionary work (spreading the church’s message), creating and maintaining church programs for the community, and dues.

In most cases, church lines of credit are used in the same way and for the same purposes as most businesses that want to sustain operations and grow. Like most companies, your income and expenses vary from month to month, and a church line of credit can help since it is available to access for emergencies, to meet projects costs, or to cover typical expenses when your cash flow slows down.

Advantages of a Church Line of Credit

Many faith-based nonprofits prefer church lines of credit over loans for a variety of reasons. Here are some of the advantages of opening a church line of credit.

1. Lower interest rates. While some churches rely on credit card financing to cover expenses in a pinch, in reality, interest rates for church lines of credit tend to be lower.
2. Unsecured vs. secured. A secured loan or line of credit requires collateral or a personal guarantee. Most banks require collateral, as well. The collateral may be in the form of real estate, accounts receivable, inventory, or equity in the church’s building. On the other hand, an unsecured line of credit does not require collateral or a personal guarantee.
3. Cash flow. As stated above, a church line of credit helps during the ebbs and flows of cash flow and can help get the organization out of a tight spot, such as paying wages or fixing a plumbing catastrophe.
4. Mid-sized purchases. There are some purchases a church must make that are too small to take out a traditional term loan for but too large to put on a credit card. A church line of credit offers a better solution.
5. Revolving credit. Applying for a bank loan is a lengthy and involved process. Having a church line of credit available to you so you can access the money you need, repay it, and access it again—all without reapplying for the loan is an efficient way to manage money.

Financing Solutions Church Line of Credit

At Financing Solutions, we have years of experience helping nonprofits run their organizations better. Although some lenders require personal guarantees for lines of credit, Financing Solutions does not.

With the Financing Solutions Line of Credit, you also have the benefits of an easier application process:

• There are no costs to set it up or keep it in place
• The easy 2-minute application online application
• If approved, you’ll receive a same-day, no-obligation offer letter
• The fastest setup—it only takes 48-72 hours
• Once you have the line of credit, requests for funds are wired to your bank in minutes
• You can use your line of credit whenever needed
• Inexpensive when used (low fees)
• There are no restrictions in place or collateral required
• No personal guarantee is required, either
• Financing Solutions is a leading provider of lines of credit
• We are a reputable company with an A+ & 5-star rating
• You can pay off the line whenever you are ready
• The credit line is easy to renew and renews yearly
• You have a secured account portal access 24 x 7

A church line of credit is a good funding resource that’s available whenever your church needs it. If you want to see if your church would be approved and for how much, please fill out the no-obligation, 2-minute line of credit application here.