Much like when building physical structures, churches and faith-based organizations need to spend time upfront understanding the importance of various financing options available to them. Of course, the term ‘financing’ usually makes one think of personal loans or credit card usage, but it encompasses so much more, even if at a grassroots level. A church’s financial literacy encompasses an understanding of the income that comes from its’ members, such as tithing, how much money is spent on different areas of outreach and stewardship, the role of parent churches or diocese, and the ongoing interest in developing property and growth for the organization.
A key component of financing that many church leaders don’t have much experience with, is entering into a contract for a shareholder loan agreement template. A shareholder loan is commonly used when funding real estate development projects that belong to a company, or in this case, a church. It’s also useful when the lender and the shareholder have a solid relationship, and they want to open dialogue around an ongoing basis for providing loans to each other. For the borrower, a shareholder loan works similarly to a mortgage, where they would make monthly payments to the lender over a set term. For the lender, they would make money off the interest charged.
The shareholder loan agreement template itself can be useful tool, not only for ensuring that a contract is created, but also helping constituents of a church understanding the importance of good record keeping and following through on fiscal promises. While in the process of writing and executing your agreement, it’s also worthwhile to consider financing options that can help you with the development of new property, for example.
When financing new buildings, you may want to initially aim to procure a short-term construction loan, as opposed to a more traditional mortgage. A construction loan is usually for one year, and borrowed at a set interest rate. On the other hand, a long-term mortgage can often be paid off over twenty or thirty years.
When developing your new property, it’s important to ensure that you’ve taken into consideration the costs of building the property. Be sure to conduct extensive financial planning with your leadership team and prayerfully consider the costs of building and maintaining new property. Too often, churches start ambitious building projects without having determined the costs of building the property or whether it will be feasible to develop a parish hall, a chapel, and long-term care home in a particular area.
At Prattville Community Church, we believe that our faith journey is an important one, and we want to see the fruits of our labour in all the work that we do. That’s why when we hear about new financing tools that can help us improve our building and community outreach, we encourage our members to research them.
Of course, financing can be a touchy subject, so we don’t make any recommendations to anyone. However, we are always talking about new opportunities that allow us to grow financially, both as individuals and as a community. This past winter, we decided to do some fundraising to help fund the construction of our new hall, and some congregation members made the decision to sell homemade baked goods. So, if you’re looking for ways to help others in your church community grow in their financial knowledge and management, consider partnering people with someone who has experience selling goods or raising funds. Many people have no idea how to make a presale list, or to follow up with customers to collect the money after the sale. Additionally, many don’t understand how to take accurate inventory of the goods remaining after the sale, and gather incoming receipts for materials and other expenses associated with the project. Offering seminars to help individuals and families understand a commonly used financial item that is already in their lives as well, will help them learn about financial matters in a low pressure environment, while making a significant difference to their personal finances in the long run.
Shareholders loans are commonly used in building and construction projects, especially for large community structures. However, if your newly built structure was financed through a shareholder loan agreement, it’s important to understand the terms of that agreement. If you are the lender on a shareholder loan agreement, you’ll definitely want to get acquainted with what a shareholder loan agreement template looks like, so as to know exactly what should be included within your agreement template.
The key to remember is that shareholder loan agreement templates commonly contain the Canadian Finance and Government of Canada laws that apply to these types of agreement. These laws help ensure that both your organization and the lender/all other shareholders are protected. Thus, learning about how to read, interpret, and use a shareholder loan agreement template is essential to ensuring that your building project is completed to the best of your abilities, and that you are getting maximum value for your loan.
For more information on financing options for churches, you can visit IRS – Churches and Religious Organizations.