Church Building, Finance and Administration Resource

Administration, Financing and Construction Resources

to Help Manage the Business of the Church

|  Home  |  Church Construction  |  Church Financing  |  Church Plans  |  Church Building Guide  |  Free Goodies  |   Contact Us  | 

Church Bond Programs





A Church Bond Offering May Help Finance Your Construction

Church bond offerings are somewhat similar to conventional church loans in that church bond program can help provide money for your building program.  The primary difference in bond programs, as opposed  to conventional church financing, is that with a conventional church loan, you borrow the money from one lender.  With bonds, you borrow the money from a number of lenders...those who buy your church bond offering.

Church bonds may be a good fit for one church and not another. Generally speaking, a church bond offering is more expensive to the church than a conventional loan.  While the interest rate may be lower on a church bond offering, there are significant expenses in a bond offering, (especially a public bond offering) that drive up the effective interest rate of the church bond offering.

Conventional loans may have a 1% fee for closing costs.  A bond offering may have fees that are 10-13% or more.  When you amortize the higher up-front cost of the bond offering over 20 years of the note, it may only raise the effective interest rate (the declared interest rate plus the cost of doing the offering amortized over the life of the bond offering) around 1/2%.  If the bond offering is 1.5% lower than competitive loans this is still apparently a good deal.  The catch comes in when you want to pay the bond offering off quicker than the full term of the notes.  While there should be no pre-payment penalty for early payoff, the effective interest rate will be much higher because you are now amortizing the up-front fees over a much shorter period of time. This, in turn, raises the effective interest rate.  For example:  If the church purposes to pay off their bond in 7 years instead of 20, the closing costs are only amortized over 7 years, which may add somewhere around 3-4% to the declared interest rate, making the effective interest rate higher than conventional financing.

This said, a church bond program is probably better fit for churches that are not going to be aggressive about paying out of the bonds early.  They may also be appropriate for churches that can get more financing through a church bond offering than they can with conventional lenders.  Church bonds may be able to provide more church construction financing than a conventional loan as many church bond offerings have slightly more generous underwriting criteria.

Private bond offerings, those sold within the congregation as opposed to public offerings, have lower up-front costs associated with them. If your members have significant capital in existing mutual funds or retirement accounts, the private offering may be a wonderful way for those to safely use money sitting retirement accounts to help fund your church bond program, while earning a good return.  A church bond program, however, should not take the place of a capital stewardship campaign.  One is an investment, the other an offering to God.

Download Preparing to Build for a side by side comparison of loans and bonds - the answers may surprise you.  Find out how a lower interest rate can cost your church thousands of dollars more in its church loan.


Church Building Guide


Written by an experienced church building consultant,

Preparing to Build provides your church valuable, real-world insight based on real-world experiences and input from hundreds of church building projects.

"Preparing to Build was an incredible value - just a wealth of
  information. The truth & his experience jump off the pages

           Dwight VanDaveer, Engineer & Church Building Committee Member

With over 160 information packed pages, this book will explain the process of building and how equip the saints for the work of building the church in an effective manner that will reduce the church's cost, risk and effort.  Click for more information or to purchase.



All Rights Reserved - Copyright (c) 2006 - Contact us for Reprint information about Church Bond Financing