ADF Loans
Help for Church Plants Seeking Property
One of the many challenges facing new churches within the Alliance is being able to secure land for a future church site in community growth areas where vacant land is being bought up quickly. These young congregations typically cannot afford a loan for such a property purchase. As a result, these churches often find themselves having to move out of their target neighborhoods or caught in a seemingly endless cycle of having to lease inadequate facilities.
To offset this dilemma, ADF offers the “District Land Purchase” loan product (DLP). These loans are designed to help extension churches obtain prime target land before they have the cash flow necessary to sustain a traditional loan. The following is a brief summary of the loan terms:
- It must be demonstrated that similar property will probably not be available in the future due either to escalating prices or lack of other vacant lots, or that the property is significantly under priced.
- Loans are made directly to districts. All district loans or loans which the district has guaranteed must be current.
- The loan must be for a church that is already in existence and meeting for worship.
- Property purchases are not to be speculative – there must be a legitimate expectation that the church will use the property for a worship site. Excessive quantities of land may only be purchased if they are a necessary component of a purchase agreement to obtain the desired property.
- There is a 25 percent equity requirement which can be met using cash, investments within ADF used as collateral, other district property used as collateral, or any combination of the above.
- The land may not have any buildings on it (an exception might be made for a small structure if it can be proven that the structure does not significantly add to the value of the property).
- The loan rate is adjustable each month, but churches that are eligible for this product typically qualify for the extension church rate which is ADF's lowest rate available.
- The loan term is five years, although exceptions can be made to extend this up to eight years.
- No loan payments are required during the first two years of the loan, although interest does accrue during this time.
- Beginning in year three, the church or district must pay the monthly interest accrual on the loan. The district accepts ultimate responsibility for these payments.
- These monthly payments are not applied directly to the loan. Rather, they are deposited in a special district–owned ADF savings account so that they can earn interest.
- It is hoped that, by the end of the loan term, the church would be financially ready to construct phase one of a church building and the DLP would be refinanced into a new construction loan. If not ready to build, the church can still refinance the loan into a traditional loan product or, if necessary, the land can be sold to pay off the loan. The monthly payments that were invested into the ADF savings account are applied to this final transaction.
- Assuming the DLP is refinanced or paid off by the maturity date, a credit is applied for the interest rate being retroactively reduced by one–half percent going back to the date of loan origination.
A number of churches and districts have already reaped the benefits of this unique loan product. For more information, please contact the Church Services Group toll–free at 888–878–3060 or e–mail: adf@adf-inc.com.