Virginia United Methodist Development Company (DEVCO) has a unique mission of serving Methodist churches throughout the Commonwealth of Virginia, by providing loans, to support their local communities. We see ourselves as a leader, in inspiring church leadership, to seek all of their opportunities when a lending need has been identified. DEVCO’s mission is to create loan opportunities for churches to provide economic power to enhance their ministries. Over the past couple of years, it has been discovered that many Methodist churches have approached financial institutions to assist with their funding needs in financing construction projects, capital improvements, building and real estate acquisitions and other financial development projects. What many churches fail to recognize is the principal pre-payment penalty that exists as part of the loan terms and conditions.
In an effort to obtain a lower interest rate, during these times of rising interest rates, churches have found a need to refinance their loans before their loan matures. At maturity, the rates increase to a significant level. The challenge that churches then face, is that they have signed a commitment loan document, prohibiting them from refinancing their mortgage loan with another lender. One particular church approached DEVCO in search of refinancing its mortgage loan, before the rate increased to an unreasonable level, and in effect put a strain on the church’s cash flow and financial condition. After reviewing their loan commitment letter and term sheet, it clearly indicated that the church would be required to pay a 5% pre-payment penalty, if the loan was paid off by another lender. In this case, DEVCO could have saved the church over $24,000.00 in annual cash flow; however, due to the substantial principal pre-payment penalty, it was not feasible for the church to pursue a loan with DEVCO. Therefore, they missed out on the ability to enjoy significant cash flow savings. DEVCO’s refinance program could have been available to provide the church with stronger ministries to better serve their local community. What’s the point? The point is that church leadership must be aware of the restrictions and conditions that financial institutions impose on them when seeking and obtaining a loan.
According to DEVCO’s lending policy, at no time, will a principal pre-payment penalty be assessed to a borrower. We believe that church leadership should focus on all lending opportunities whether at DEVCO, a bank, credit union, and any other financial institutions. It is important that a church’s need is met through a team of dedicated lending experts, who are willing to create a trusting and long-lasting relationship. At DEVCO, we have worked with many churches to help invigorate their local communities and neighborhoods. Although many churches have faced the unfortunate situation of having to pay a principal pre-payment penalty, DEVCO still has been able to assist churches in saving an aggregate of $650,000.00 in annual cash flow. We encourage you to make the most of your opportunity and seek DEVCO’s lending expertise. We have created a platform of lending services and products beyond what other financial institutions may have to offer. We, here at DEVCO, continue to work diligently every day to provide economic growth to our Methodist church partners in expanding ministries to build stronger communities. We truly believe that what we do is a first step to create a lending model of “Methodists helping Methodists!”