An old Sunday school rhyme instructed children to clasp their hands together, fingers intertwined with forefingers pointed skyward. “Here is the church, here is the steeple,” the rhyme went. Then the children opened their hands—wiggling fingers still intertwined—and recited, “Open the door, and see all the people.”

Cute poem, but we all know the intrinsic problem with its words. The church is the people, not the building where they gather. But what about the building? Is it a necessary evil? A financial encumbrance that sucks resources from important ministry? 

For many church planters, a permanent facility is a key step in their church’s journey—a milestone that speaks to permanence and stability in a community. A place of refuge and service and a sign that a congregation is in it for the long haul.

Buildings often make sense, but rarely do church planters have the cash on hand to purchase outright or build from scratch. Instead, they often find it necessary to assume debt to scale ministry. The risks of this approach were illustrated vividly and sadly in the financial crisis of 2007-2008, when real estate values fell and mortgage defaults skyrocketed. Church foreclosures (something unheard of in the years before) made it into news headlines, and congregations found themselves homeless.

A March 2012 article by Tim Reid in Reuters, titled “Banks foreclosing on churches in record numbers,” was written at the tail end of the crisis. Reid noted that 270 churches had been foreclosed on in the two previous years, but only a handful in the decade before the crisis began.

Such occurrences have left many church leaders understandably nervous about borrowing money from institutions whose priorities (generating profits for shareholders and mitigating risk) may not always align with the faith it takes to expand a church’s physical footprint in a community. For many, when it comes to funding their vision, linking arms with a for-profit bank can seem like a compromise—and a risk.

KINGDOM WORK

In contrast, helping churches fund their vision is what drives Wesleyan Investment Foundation (WIF). Launched in 1946 by members of The Wesleyan Church, the founding purpose of the organization was to fund new church buildings within the denomination. Seventy-six years later, WIF has 1,400 loan clients, nearly 13,000 investors and a current portfolio of about $1.5 billion in loans. Located in Fishers, Indiana, outside Indianapolis, it is the second-largest church loan fund in the country.

AVAIL Journal sat down with WIF CEO Craig Dunn and Chief Strategy Officer Norwood Davis to talk about the differences between WIF and a traditional bank—and how their approach offers unique advantages in the ministry context. 

Dunn has a long history with both The Wesleyan Church and WIF. Nearly 30 years after its founding, WIF was “upside down financially,” as Dunn describes it, with $5 million in assets and $6 million in liabilities. His father, John, was asked to take the reins in 1975. With a background as a businessman and entrepreneur—as well as a pastor and district leader in the denomination—John Dunn had a reputation for turning things around. In 2000, when the board asked Craig to move into the role of CEO, WIF had $30 million in equity.

Trained as an attorney, Craig Dunn had served for 13 years in the denominational headquarters. But he had also gotten a glimpse of what other denominations and churches were doing for the kingdom, and in 2002 Dunn led WIF to expand and offer loans (and investment accounts) outside The Wesleyan Church. Now their portfolio of investors and loans includes churches in 13 denominations and countless independent churches.

“We knew this was a kingdom work, and not just a denominational work,” Dunn notes. “Now it’s the biggest part of our business.”

PARTNERS IN VISION

Whereas a credit union is a cooperative owned by its members, and a bank is a for-profit institution designed to generate earnings for its shareholders, WIF is a nonprofit, tax-exempt 501(c)(3) controlled by a religious institution and designed to plow profits back into ministry.

“The difference for us is we’re not owned by anybody,” Davis explains. “All of the profits we generate from our operating activities flow right back into kingdom work and planting churches.”

Before joining WIF in 2022, Davis served for 17 years as CFO of 12Stone Church, a multisite

congregation in the Atlanta area. In his role at 12Stone, Davis led the team that located, acquired and developed the church campuses. He oversaw the financing, construction and launch of seven campuses and the property acquisition for an eighth one.

“When I was at 12Stone, not only did we borrow money from WIF for our church construction,” Davis explains, “we also had our cash reserves invested there to get a reasonable return on them while they were serving their purpose as a cash reserve.”

In addition to churches like 12Stone, investors include individuals and pension funds that invest with WIF and generate returns currently as high as 3.5% annually. Unlike a CD or other long-term investment, the funds are available on demand. Davis stresses that WIF is not a bank so it cannot offer FDIC-insured accounts. That said, he notes that, in its 77-year history, WIF has honored every withdrawal request. In order to do this, WIF maintains healthy cash reserves.

According to its latest offering circular, as of August 31, 2022, WIF had liquid assets of 22% of its outstanding investments, more than twice as much as the 10% the Federal Reserve requires banks to hold.

“We’ve always honored every request for a withdrawal,” Davis says. “We take that responsibility very seriously—just as a bank or a credit union would do.”

FINANCING THE DREAM

Just as remarkable, WIF has also never foreclosed on any of the thousands of churches that have borrowed money from the foundation. Davis attributes this success to the organization’s unique position in the lending marketplace. Because it is not beholden to shareholders, WIF can customize a loan and package it in a way that fits the borrower’s unique vision. Dunn notes that the landscape of commercial financing has changed dramatically since WIF’s inception 77 years ago, and this has introduced new risks to churches and ministries.

“Churches in the past—20, 30, 40, 50 years ago—didn’t want to have debt. They wanted to raise cash and pay for their buildings as much as they could. So a loan might be 30% the cost of the building, and they would be able to raise the rest of it,” he explains. “Now, the opposite is true. Churches are raising 20 or 30% of the cost and financing the rest.”

This is not always due to impatience or foolhardiness on the part of churches. Dunn explains that the costs of property, construction and technology have increased exponentially, making the possibility of building with cash nearly impossible for growing congregations.

That said, it’s important for church leaders to understand the difference between commercial and home mortgages. With terms of three, five and 10 years, when a commercial mortgage matures, borrowers often face a large balloon payment and are forced to either settle the loan or refinance with another bank—along with all the fees that come with a new loan.

During the financial crisis 10 years ago, when church loans matured, banks were less inclined to refinance, leaving churches on the hook for the balance of their original mortgages in an already precarious economic environment. Unlike a home, which can be resold to recoup losses, when a bank forecloses on a church, it is more difficult to find a buyer—thus making banks reluctant to assume the risk of a church mortgage during economic downturns.

Davis explains that, due to WIF’s position as both a ministry and a financial institution, it is able to work with churches when they run into unexpected financial obstacles. However, many of these obstacles are avoided because of the due diligence WIF practices with churches from the beginning of the process.

“We partner with churches on the very front end,” Davis explains. “They may come asking for a loan for a renovation, a building addition or perhaps even a new campus. But often a pastor’s vision will far exceed the current project—thinking about two, three, maybe even four projects down the road. When we have conversations with pastors and executive teams of churches, we’re often sitting down with them, really trying to understand what their future vision is, not just for this project.”

A CHANGING LANDSCAPE

WIF’s decades of working with churches give them a unique ability to identify congregations that have the DNA for sustainable impact in a community. In the 22 years since he began leading WIF, Dunn has seen dramatic changes in the needs and desires of churches as they build and expand their ministries. He notes that prior to his tenure many of the loans were for new, purpose-built churches. In the last two decades, however, there has been an increase in repurposing existing buildings—from strip malls and fraternal lodges to big-box stores and car dealerships. If a church building doesn’t need to “look” like a church building, the opportunities for creative design are endless.

“I think we have a special talent for identifying and helping those churches get the facility tools they need to reach their communities for Christ,” Dunn states. “We know what it looks like to be in a fast growing situation. We’ve worked with thousands of these churches through the years, and we understand them.”

Because it is not governed by the same rules as a bank, and due to its ability to deep dive into a church’s health, vision and staff, WIF is able to work with churches banks would refuse and offer terms banks can’t.

“Often, banks won’t touch the kind of loans that we do for these young church plants,” Dunn notes, “but we have faith and confidence that the Lord’s going to help them grow, and we know the stability factor that comes with a facility. It’s a statement to their people. It’s a statement to the community that says, ‘Hey, we’re here. We’re planting a flag, bought the ground, building the building. We’re not going anywhere. So come see us. We’re open for kingdom business.’”

Dunn notes, however, that WIF is not reckless in giving out loans, and its track record of zero foreclosures is evidence of that.

“We don’t say yes to every church. I tell my team—and this is in our DNA—I don’t like to say no. So, if we can’t say yes, I want to say, ‘Not today, but maybe tomorrow—and here’s the path to tomorrow,’” he explains “‘Here’s what you need to do to get your house in order so that we can say yes.’ We rarely say just a hard no and leave it at that.”

Davis emphasizes that a church must have its house in order before they assume the risks that come with a loan. 

“The biggest one that I would say is to really have your affairs in order. Have good practices around your accounting, your financial reporting to the board of your church,” he explains. “If you’re a small church and need some assistance, reach out to other churches, get their help and assistance. There are a lot of great organizations that can provide that kind of assistance.”

NEW CHALLENGES

Getting in over their heads in financing a new construction project is not the only risk new churches face, however, and Dunn believes leaders should be circumspect about cultural and political headwinds that threaten the church. Because of their tax-exempt status, churches have historically enjoyed a privileged status in most communities, occupying high-value property and avoiding taxes and fees that would otherwise be crippling to their ability to do ministry.

“We’ve been seeing for years now discrimination from municipalities where churches are trying to work, to buy buildings or build buildings,” he explains. “These municipalities are saying no to churches. ‘We’re not going to let you build in a certain area,’ or ‘We don’t want you in our city or town at all.’ Because it takes property off the tax rolls, they’re looking at churches as a burden.”

Dunn points to cases in which churches have lost tax-exempt status for properties such as daycares and education buildings or been assessed exorbitant fees under legal loopholes called PILOT (“payment in lieu of taxes”). While this primarily applies to auxiliary buildings in which worship services do not take place, he believes sanctuaries and worship centers could be next.

While it’s to be expected that an increasingly secular culture will have less regard for the beliefs of churches and religious organizations, local governments are asking what churches are doing to earn the valuable exemptions they’ve been granted. With that in mind, Dunn emphasizes that it is crucial that churches strive to bring tangible benefits to the community—to make it difficult for municipalities to take away exemptions because of the obvious benefits that churches bring.

“The Lord intended us to be the salt and light in the community, to be generous, to provide services that the government shouldn’t be providing and can’t provide,” he argues. “That’s a way to at least slow down this progression of the threats against a church and its existence.”

A side effect of opposition to the church is cooperation. In other words, when churches face persecution, they are less likely to squabble over their differences with one another. But Dunn hopes such collaboration will increasingly be by design, rather than by default.

“When there’s a threat from the outside, churches will band together because they have to. But you can’t lead the agenda at that point in time. You’re just reacting to some outside force,” he explains. “I would rather cooperate now, work together now, set our own agenda and set up the structures that we think will benefit the kingdom work we’re doing now, while we still have the opportunities and the time to do it. And I’m really encouraged about that—the signs I’m seeing of cooperation across denominational lines and people working together in the kingdom.”

This type of collaboration is at the heart of WIF’s mission: connecting churches with the resources they need to make a difference in their communities—and doing so with an expertise informed by both faith and good stewardship.

“I love the work we get to do,” Dunn says. “We just want to serve well, use the resources that God has given us to move the kingdom further and faster in the future. We’re just happy to play a small part in the good stuff that’s happening in the kingdom.”