TERM Loan Guidelines
1) Completed Project Principle – Assumes construction will complete the project with a certificate of occupancy for the entire building. In addition, adequate provision must be made for furnishings so that the new building will be fully usable.
2) Thirty percent of the total cost of the project must be “on hand” by completion of project (includes that portion of total already spent). It is more desirable for the local church to have this 30% requirement met at the beginning of construction.
3) Loan amortization not to exceed 15 years – no balloon balances at end.
4) Loan amortization payment schedule (principal and interest) must not be more than thirty percent (30%) of the total income of the church for operations, apportionments, benevolences, capital improvements, and debt repayment.
5) The local Church must demonstrate ability to:
a) Generate sufficient cash flow to make loan payments and cover all other expenses, including benevolences, apportionments in full, increased operating costs of new building, etc.
b) Confirm this cash flow through: i) The successful collection of building fund pledges in amounts sufficient to cover 30% requirement noted in paragraph 2 above, and ii) Secured pledges from a second campaign sufficient to assure adequate monthly income to meet loan amortization for the first three years of occupancy.
6) Demonstrate ability of the Operating budget to grow (without jeopardizing the loan payments) to reflect larger operating costs, staff and increased Conference apportionments due to grade point increases.
7) Contractor must provide a 100% performance bond to guarantee completion of the contract.
8) Cash on hand, including project costs previously paid, plus written loan commitments, must equal final total project costs. Total project costs include “soft” costs. Be sure to include these provisions in total project cost projections:
a) Contingency allowance – minimum of 15% for new construction, 20% for remodeling.
b) 100% performance bond.
c) Financing costs, including loan fees, appraisals, interest during construction, Title Insurance, etc.
d) All permit costs and “local bonds”.
e) Furnishings and equipment.
9) Develop a cash flow plan to assure necessary fund availability from building fund or loan proceeds to make required payments during construction.
10) Any loan guaranty requires the local church to complete a loan application form and process it with the Board of Global Ministries as if it were making the loan. Guaranty applies only to loans from commercial banks, United Methodist Development Fund, or Faith Foundation Northwest.
11) All loan and loan guaranties require that all provisions of the Book of Discipline be followed. The following paragraphs (2012 edition) are particularly applicable:
¶2544 – all sub paragraphs – note especially: ¶2544.4.(3) includes provision for handicapped access ability ¶2544.4.(f) – develop comprehensive financial plan
¶2544.5 – Submit facilities needs and plans and financial plan to District Board of Church Location and Building (¶2520.3 and ¶2521)
¶2541 – all provisions must be followed exactly to meet lender and title company requirements
¶2542 - covers indications of the Trust Clause provision and authority of District Superintendent for the same.