Our primary purpose is to provide loans to FEC churches and affiliate organizations, used to purchase land, to buy buildings, to construct new worship facilities, to renovate, remodel, expand, and replace existing facilities.
Generally, we make mortgage and construction loans to enable FEC churches and affiliate organizations to finance the purchase of real property and for the construction of new churches and/or church facilities, other secured loans and occasionally unsecured loans to fund capital improvements.
All of our interest bearing loans are variable rate loans. Interest rates on our interest bearing loans are determined by our Board of Directors based on prevailing interest rate conditions in the financial markets of the United States. If our Board of Directors elects to adjust the interest rates on outstanding loans, our President provides 90 days written notice to each of CSF’s borrowers prior to the adjusted interest rate becoming effective.
Loans to FEC churches and affiliate organizations are made consistent with our loan guidelines and are subject to a formal loan review process. To qualify for a loan, an FEC church or affiliate organization must be a member in good standing of the FEC. An FEC church or affiliate organization may request a loan from us by submitting a written Application for funding. At the time a request is submitted, the applicant is required to provide us with a number of items related to the proposed project, its financial condition, and any proposed collateral. It is our current practice to regularly obtain a phase one environmental assessment and an independent third party appraisal of each property, although the decision whether to obtain an appraisal or an environmental assessment before approving a loan is made on a case-by-case basis. Our Board of Directors also reviews each applicant’s annual budget, giving records, and plans for raising contributions from its members in making a determination whether or not to loan funds. Our Board of Directors uses the following guidelines when considering long-term loans to be made to particular FEC churches and affiliate organizations:
- The maximum debt should be less than three times the annual giving to the FEC church or affiliate organization over the past three years (annual giving excludes all funds generated by capital campaigns);
- The amount of the monthly payment required by any loan should not exceed one-third of an FEC church’s or affiliate organization’s monthly operating budget;
- The total amount of any loan should not exceed 80% of the value of any asset being purchased or built using loan proceeds (additional short-term funding may be available for amounts backed by pledges of three years or less);
- Construction loans will be issued and converted to an amortized mortgage-based loan following project completion (construction loans are not to exceed 18 months without the review of the Board of Directors); and
- A first mortgage is preferred for all loans, but a second mortgage will be considered in special circumstances and shall not exceed 40% of the total mortgage on the property.
- The loan is to be for a specific purpose and normally needed for one year or less;
- If the loan is for personal property, then proof of ownership and insurance must be provided; and
- Lines of Credit must have, at least, one balance of zero over a twelve-month rolling period.
Although the policies described above generally guide the decision-making process of the Board of Directors, it does not always follow each of these policies when it approves a loan application and decides on the amount of the loan or the interest rate, payment schedule or other terms.
It is our current policy to provide one rate for all mortgage loans to all borrowers where CSF is the sole lender. In situations where CSF partners with other lenders for a mortgage loan (“participation loans”), it is our current policy to negotiate the interest rate, terms and conditions among the respective parties. The terms of the promissory note provide that any interest rate adjustments affecting the loan balance will affect the length of time payments are to be made unless the promissory note is re-amortized at the time of interest adjustments. This means that monthly payments may not fully amortize a borrower’s obligation, which may result in a balloon payment due at maturity. CSF’s policy is to adjust loan rates as infrequently as possible, have the Board of Directors carefully consider adjustments to loan rates, and communicate adjustments to loan rates at least 90 days in advance. Any loan issued to an FEC church or affiliate organization which removes its membership or affiliation with the FEC shall become immediately payable in full. However, CSF may continue its lending with the borrower until such time as the borrower is able to obtain financing from another lender.
If you’re interested in applying for a loan, download an application here.