Loans Available for Exiting United Methodist Churches

Churches seeking to disaffiliate from the United Methodist denomination may be interested to learn that a nonprofit corporation, the Wesleyan Investment Foundation, offers low interest loans to such churches. 

Jay Therrell of the Wesleyan Covenant Association recently hosted an online seminar with Norwood Davis of the Wesleyan Investment Foundation that may be viewed in full below or at the link here. I have transcribed the presentation for the benefit of our readers. Additionally, a question-and-answer period is viewable at the 20 minute mark of the seminar which I have not transcribed.

The Wesleyan Investment Foundation is an Indiana nonprofit corporation organized and operating exclusively for charitable and religious purposes as a tax exempt IRS 501(c)(3) entity.

Those who wish to learn more may contact Davis at: norwood@wifonline.com.

Jay Therrell: Friends, I want to introduce you to Norwood Davis. Norwood Davis is the Chief Strategy Officer for the Wesleyan Investment Foundation (WIF). The Wesleyan investment Foundation is the lending foundation for the Wesleyan Church, the Wesleyan denomination. They have since changed their charter to allow WIF to make loans to non-Wesleyan denomination churches so they give loans to Nazarene churches and Methodist churches and all sorts of non-denominational churches. They are a very large entity. I won’t tell you more than that, I’ll don’t want to steal Norwood’s thunder, but we have partnered with them to be able to offer low-interest loans to churches that need help particularly with disaffiliation so that that might have an additional resource to be able to fund those disaffiliation fees. I’m going to turn things over to Norwood Davis now and he will share this presentation with you again if you’ll just make sure that you’re on mute and then we’ll let you raise your hands and ask questions.

Norwood Davis: Great, Jay. Thank you for the time this evening. Thank you for everything that you’re doing to lead the Wesleyan Covenant Association to help churches. I’m excited to be with you all and I am the Chief Strategy Officer for the Wesleyan Investment Foundation. I’m going to tell you a little bit about WIF, but first let me just mention a couple of things. One, I have a number of colleagues on this webinar with me and I may call on them from time to time to answer specific questions. They may interject if they feel like I’ve overlooked something, so know that our entire team here at WIF is standing ready to assist and a number of them are on the phone tonight so that they’re up to speed and able to participate.

I spent years with Stone Church in Atlanta, Georgia as the Chief Financial Officer, where I oversaw our finance, I.T.,  marketing facilities, and business legal matters related to the church. When I started, we were one location and we grew to seven locations over the years. I say that only to say that I’ve sat in your shoes and that, whether you’re a pastor or a member of a church council or a lay committee that’s considering these significant matters, I’ve sat in your shoes to really try and understand what’s happening and to deliberate and discern the Will of God and leading the church. As I’ve told Jay often over the last seven months, even when I was with Stone [Church] and watching these things develop in the Methodist Church over the last several years I’ve been praying for you. I have a number of friends who are Methodist pastors in and around the Atlanta, Georgia area. We’re just honored to be able to present this information to you tonight knowing personally the burdens that you are carrying right now. Know that we’re praying for you as well.

As to the Wesleyan Investment Foundation, who we are, is a group of church leaders, pastors and lay people got together and put in a fund to help churches get built. They quickly exhausted that and began searching for investors and set up what we now know as the Wesleyan Investment Foundation, which is a denominational loan fund. We’re the second-largest denominational loan fund in the country. We work in all states and, over the years, we’ve merged or aligned with a number of other denominations. We now work with over 12 different denominations across the U.S. as well as hundreds of non-denominational churches and other church associations like the Wesleyan Covenant Association as their preferred lender from church planning organizations to church growth organizations and associations. We’re working wherever pastors and church leaders gather to help them make the decisions that they need. We work exclusively with churches: that’s all we do and that’s what we know. The team that will be working with you are seasoned, experienced professionals that have a high degree of knowledge in working with churches, church financials and church issues. It’s a great team that we have here.

How do we work? We literally have tens of thousands of investors all over the country that invest funds with the Wesleyan Investment Foundation. These are on-demand accounts that investors can get their money back within the next business day if they request it. Then we turn around and loan money to churches. Our investors are individuals, privately held companies, churches, educational institutions, [and] other not-for-profit institutions that are investing their money in the Kingdom with WIF to help grow churches, help plant churches and help churches meet the needs that they have in their organization.

As I mentioned, all we really do is church loans. We provide church loans that kind of try and take the stress out of the financing of your vision. When we work with a church, we’re really focused on getting to that “yes” with the church. We can’t say yes, all the time, but that’s our desire, that’s our intent. We work really hard with churches to get to a “yes” quickly. We’re really interested in forming a partnership with each church to understand your vision, your future, where you’re headed. We’re not interested in just a simple transaction, just a loan. We really are an investment account. We’re really focused on developing a long-term partnership with you to help build the Kingdom and help you reach your community for Christ wherever that may be.

In the years that we’ve existed, we’ve never foreclosed on the loan we’ve provided. We work really hard with churches to make sure that they’re doing everything they can to reach their community and no loan is too large or too small for us. Last month, we closed a loan for a church, about a $12,000 loan to help put a new roof on a building. The same month we closed a $40 million loan to help a church with a brand-new worship facility and expanded ministry environment. We like to say we work from $5,000 to millions and we’re excited to be able to work with churches of all different sizes, all different denominations and all different structures. So, nothing’s out-of-reach for us. We look forward to working with each church that we serve.

As I mentioned, we do have investment accounts. We offer investment accounts that serve a higher interest both for you and the Kingdom. As I mentioned, individuals and corporations know their money serves churches. An account can be opened with as little as $25. Withdrawals can be requested anytime and funds are available the next business day. We’ve never missed an interest payment to our investors and we’re honored to serve every investor’s request for withdrawal whenever they have a need for their funds.

To give you a little bit of scope, size and scale, I know many of you are going to be interested in loan terms and loan process, and we’re going to get to those things. But, again, just to give you a sense of who we are, we provide 1,400 loans that total a little over $1.4 billion dollars. Our average loan balance is a million dollars, but again we have loans literally from $5,000 to $50 million. We have a little over 14,000 investors that have invested a total of 1.5 billion dollars in the organization. Our average account balance is $104,000. Many of these are pension retirement funds or individual, not pension funds but IRA accounts, Individual Retirement Accounts, other kinds of savings accounts for different individuals, but those make up the bulk of our investment participants.

Again, just a little bit of scale to give you a size. We work with the number of loans. We have a little over 1,100 that are in a denomination – and, again, those come from a variety of denominations – we work currently with different denominations including the Wesleyans and the Nazarenes that share a theological parentage with the Methodist Church and then we have loans that are non-denominational, independent churches. The portfolio balance is almost 50-50 though, between the denominational and the non-denominational churches. It’s kind of split about evenly.

Again, we’re interested in a Kingdom partnership, and we want to build that Kingdom together with you. Opportunities for each and every church that’s on this call: first, you can invest for Kingdom interest, so any cash reserves that you have, you can invest with the Wesleyan Investment Foundation either now or in the future. Also, providing church loans: we can customize those loans to each church need. We can be flexible to the unique circumstance that you find yourself in and we’ve allocated about a million dollars that are going to be available for churches that are in the process of disaffiliation. There’s going to be plenty of funds available to us to go around.

Let me talk a little bit about general loan terms. As we’ve kind of navigated this process with different churches, we’ve already had a couple of applications come in. We’re already having some conversations with about ten churches or so. We’ve set up a program, we believe that many of these loans that are going to come in and requests are going to come in are under $250,000. We’re going to try and make it simple for everyone, we’re going to set an interest rate of 5.5 for those loans. We’ll make a term up to 20 years. If you want a seven-year loan or ten year loan or 15 year loan we can do that, but we can also go up to 20 years.

We’ll have a flat origination fee of $500, which really at that level it’s just barely covering our cost associated with processing, originating a loan. But when we do a loan term, if you’ve ever done any commercial financing, you know that most commercial banks will finance a loan but it’s renewable every three years – sometimes five years – and upon every renewal there’s a new origination fee. We don’t do that. We set up a loan term for the long term and then we only charge one origination fee. That’s the only fee that you’ll have with us. The mortgage type: we will take a first mortgage on church property as part of this loan process. That will be our security and collateral. In the loan there will be no prepayment penalty for loans under $250,000. We’re not going to require an appraisal for loans under $250,000 and we’ll do a rate lock at a three-year fixed rate. That means that your rate on this would be fixed for three years at 5.5.

At the end of those three years, we may adjust that rate up or down depending on what the market has done in the last year or so.

That range of interest rate has been as low as 3 ½ percent and as high as 7 ½ percent. So that 5 ½ percent is kind of somewhere right in the middle of where we’ve been over the last years for loans over $250,000 and we do anticipate a handful of those will be a little bit more negotiable. But the rate, the terms, whether or not we need an appraisal or not – again, it just depends on the amount of the loan and where we end up. Obviously, making a loan of $50,000 is quite different from making a loan of $50 million, so we would negotiate all those things.

As far as what would be required, our general loan guidelines for loans under $250,000, we’d like to see a loan to value on the church property of 80. So if the church property was valued at $100,000, we would give an $80,000 loan. Debt-to-income ratio would be less than three-to-one. By way of illustration, if the church budget is $50,000 a year, we would make a loan of up to $150,000. In these cases, the church would have to purchase title insurance as part of this process. Upon getting a complete application (and there’s an online application process that will detail towards the end of the presentation) you could expect to hear from us in about seven to ten days. Again, if it’s pretty straightforward, we’d be able to give you a pretty strong firm indication with us in seven to ten days. If you have a unique set of circumstances or incomplete information, it may take a little bit more time.

We anticipate that closing time will take four to six weeks. We’ll be honest with you though: when that’s a little bit of a we don’t know, and we know this disaffiliation process and some of the title on many of these church properties may be held in trust. That stuff will have to get cleaned up so we’re working to understand how that process is going to look. It may be four to eight weeks, but generally we’ll try and be able to close a loan within four to six weeks.

An investment account would be available to you. It’s not required, but would be available to you. For financials, we’ll take two years of the fiscal year and then year-to-date financials for loans under $250,000. For loans over $250,000, it will take three years. Several people have asked along the way do they need to have audited financials from a CPA firm. We know many smaller churches don’t do that. No, you don’t need to have audited financials. We’ll take a look at what you’ve got and then, if we have questions, we’ll get back to you. We may have some follow-up questions depending on the nature of your financial presentation but, generally, will be flexible.

The use of proceeds: we know that each annual conference is doing things a little bit differently so we would want some verification and validation from the annual conference of the disaffiliation, that you’re going to be released when these proceeds are used to pay that disaffiliation fee.

Requirements for all loans: we would like an authorizing resolution from the congregation and / or the church council. We would anticipate annual conference approval. The church would be responsible for local legal representation for the disaffiliation agreements, the real estate deed and documentation filing. We would encourage each and every church to have appropriate legal counsel. We will need clear title and removal of the trust clause on all property collateral and then any existing debts must be refinanced with WIF as the sole lender. If you happen to have existing debt on your church property we would ask that you refinance everything with us as the sole lender on that church property.

A little bit of a timeline of how we would see this loan process working out: each church would make their application, we would review it in seven to ten business days. We’d be able to give you a response – a pretty strong indication in those seven to ten days. Then, during the next four to eight weeks, we’d anticipate you’d have your local church approval for this affiliation, your annual conference approval for disaffiliation, and then we’d have the title commitment, legal document preparation, and review during that four to eight weeks. Then the loan closing and funding would occur.

The next steps – and I’ll leave this up for some time for you to be able to take those down or use the QR code if you’d like – but really the next step is you can open an investment account. Go online to do that. You can apply for the loan – you see the way to apply for that loan or, if you just have more questions or conversations that you’d like to have, talk a little bit about your situation, you’ve got my email there as well as my direct phone number. Happy to have a conversation with you and see where it goes, we’re already having a number of conversations already with churches and we’re happy to dig in and answer your questions. We recognize that this is not going to be a one-size-fits-all kind of thing and that each church is going to have their own unique dynamics. We’re happy to participate and help you with that.

So with that I’m happy to take questions at this time.

Jay Therrell: I’ll try to moderate those and that way you won’t have to worry about it and that will focus on answering questions.