September 22, 2011
"Shopping" for a Bank
Quick thoughts for churches that work with banks.
At times you may find the need to “shop” banks. For example, if your church is ready to secure a loan to begin a large building project, such as a renovation or even a new facility, you will want to contact several local banks, provide them with the information they need, and go with the bank that offers you the best rate. This assumes the bank has a good reputation and is willing to work with your church. The obvious advantage of shopping banks is that you will likely get a better rate, especially if the bank knows you are shopping.
Our advice is to shop banks when you’re looking for a large loan. If you find a bank that’s willing to give you a better rate than your existing bank, then use this as leverage. Approach your current bank and ask if they’ll match the other bank’s offer. If they refuse, then you’ll need to decide whether to go with the new bank for the new loan but stay with the old bank for your existing services or move to the new bank entirely. (To provide you with a special rate, most banks will ask that you move all your accounts to them.)
So you should consider whether the better rate is worth changing banks. How much will you really save?
Another factor is your history with your current bank. Have they treated you well in the past? If so, then you may want to take this into account before making your decision.
To get a good feel for the market, check with other churches that have secured construction loans and compare their rates with the ones the bank is offering you. It’s best, however, not to let the bank know where you’re getting your information. Also be sure you are comparing similar situations—size and age of the church, and the size of the loan.
I (Aubrey) discussed this concept with a Christian banker who warned that churches should be very careful as to how they shop banks. This is especially true if they’re a small church or anticipating loans under one million dollars. His advice was not to take a “hard sell” approach, because bankers will back off and lose interest in doing business with you. As we explained earlier, banks have been reluctant to make loans to churches in the past and may still be reluctant to make a loan they consider either risky or high maintenance.How to Choose a Bank
- Can it service the church’s needs?
- Does it have an officer who understands a church’s needs?
- Does the bank have a good reputation?
- Is the bank located conveniently to the church?
Excerpted from Money Matters in Church by Aubrey Malphurs and Steve Stroope (Baker Books, a division of Baker Publishing Group, 2007). Used by permission. All rights to this material are reserved. Material is not to be reproduced, scanned, copied, or distributed in any printed or electronic form without written permission from Baker Publishing Group.