FAQ Internal loan
Internal EC Loan
Why raise the loan within EC?
The strategy in raising the loan within the congregation came from a retired couple that has both gifted funds and offered a loan of $100,000. They live off their investments and wanted to convey to others also considering offering a loan they couldn’t imagine a better investment than investing in the future of the Gospel Ministry Centre.
The EC Board recognise the benefits in raising the loan within the congregation is huge, in that the EC Board will have greater flexibility in balancing ministry expense’s with paying back the loans.
The EC Board wish to encourage those who have the capacity to partake in giving a loan to seriously pray this through, and either enter the amount you can loan via the Secure Contact form provided or speak directly to Doug Andrews or Stephen Hickingbotham. All communication is kept confidential with these two men in which the EC Board will only see the amounts given on loan or committed to future giving, not the people attached to those loans / commitments. The EC Board has made the decision to keep Todd at arm’s length from the specifics of who has offered loans.
What happens if too many people offer a loan?
We actually hope when all the offers for a loan are combined it will be in excess of the $200,000. If we obtain the $200,000 this will get us over the line in purchasing the property, at the same time it reduces our cash reserves substantially.
After all the loan offers are received, if the total amount is in excess of $200,000 the EC Board will determine how much of the excess will be accepted as they consider what amount of cash reserves should be kept.
Once the decision is made by the EC Board how much of the loans are accepted, if it is less than the total loans on offer, then all loans will be reduced proportionally.
The more people that offer loans the more the burden is reduced as it is shared amongst many.
The EC Board is encouraging a minimum loan amount of $10,000. There will be constant management of these loans in which to make it practical its will work best if each loan is a considerable amount. At this stage the EC Board just want to know what loans people can offer Exchange Church to take to the Partners meeting. The actual loan wouldn’t need to be transferred unil XX/XX/XXXX on the basis the purchase of the land is approved by the Partners and EC Board.
Is the loan secure?
The loan given to EC is not secured, this means we cannot guarantee repayments back. Yes, putting your money in a bank term deposit is safer as it is guaranteed by the Federal Government up to a value of $250,000. In addition, a bank holds a regulated level of capital to protect your investment.
The EC Board will be prioritising the financial ministry needs of EC as well as paying back the loans. The EC Board is conscious in not crippling the ministry arm of EC financially. The huge advantage in entering a loan arrangement internally with people is that everybody understands this up front so that all those people giving a loan are actually enabling greater freedom and flexibility with the EC ministry. When the finances are low for some months repayments back may not take place, but the interest accrued will be added monthly to each loan total.
The objective will be to payback the loans before considering moving to the next stage of gathering funds for a building, so yes, the paying back of your loan is considered a priority within the EC Board.
So why give EC a loan? We see this as a gospel investment into this district that will last well after we have gone to glory, we do not shy away in acknowledging the risks in such an investment. At the same time we acknowledge this has always been how church buildings have been established. By faith, people have gifted money or given unsecure loans as they look beyond the money and investing into the Lord’s ministry using what is the Lord’s anyway, our finances. Entering into a commercial loan will greatly increase the financial pressure on the Church each month, entering into an internal loan will remove that pressure.
How is the return Interest rate determined?
The interest rate paid to you on the loan given to EC is determined at the end of the month using the Commonwealth Bank of Australia (CBA) variable home interest rate. We chose the CBA because it is the largest Home loan provider in Australia. The competitive environment in the banking industry means all of the big four banks are similar in their offerings.
To find the current loan interest rate with the CBA Click Here It’s the ‘Comparison Rate’ used, which is the higher of the two rates displayed.
You will receive a statement within the first week of the month for the previous month in which the statement will have an opening balance, interest earned in the month, the rate of interest, any payments made paying off the loan and a closing balance. These statements will be created by Doug Andrews with Stephen Hickingbotham confirming the statement is correct before it is sent to you. The details of who belongs to which statement will be kept confidential with these two men. The EC Board will have access to the statement details without knowing who the statements belong to.
Redeeming the Loan
Can I redeem my loan at any time?
No, you cannot redeem the loan. One of the loan conditions is that it is understood you are unable to redeem all or some of the loan back if your financial circumstances change. We accept this sounds harsh; the reality is we are not a bank in which we have surplus cash to redeem a loan. The loan repayments will be obtained from our offerings and gifting’s over time.
We only wish to receive loans from people within the congregation that fully understand this restriction. This will potentially restrict the amount of loans offered or the actual amounts given for a loan.
The EC Board does not want anyone to be placed under financial stress with either their gifting’s or loans. For those offering loans to EC please think this through wisely and pray about the amount you choose to offer EC as a loan.
When? How often? Who receives what portions?
Loan repayments will occur when either gifting from the congregation occurs in paying back the loans or a surplus is raised above our ministry expenses through normal giving.
How often repayments occur is unknown, as this is dependent on the congregation providing the funds. The EC Board will decide how often and the amounts for paying back the loans as funds come available.
Because each loan made available will be of different amounts the payment back on each loan when funds are available will be proportional to the total amount received for loan. For example, if we had $10,000 to pay back to those people who gave loans and one of those loans was 50% of the total loans received they would then receive back 50% of the available funds to pay back on the loans. If a person gave a loan that was 10% of the total loans received they would receive 10% of the available funds to pay back their loan. Paying back the loans this way means it is an equitable arrangement which is fair to everyone who has given a loan regardless how much they have loaned EC.
If we obtain a commercial loan our repayments on that loan would take precedence over any ministry expenses and would have to be paid monthly. By having an internal loan from within we would be able to establish a much better ministry expense / loan repayment balance where ministry wouldn’t be sacrificed.
What is the condition of Exchange Church Finances?
Exchange Church is faith-based and the EC Board recognise that the Church’s income comes from the gospel generosity of the congregation as they give back to the Lord what He has already blessed into their lives.
The Exchange Church finances are very tight, but have always been able to cover expenses with just a small surplus at the end each financial year. Purchasing land will be a further step of faith, believing that by faith future finances will be provided.
The EC Board acknowledges that a commercial loan would place a very significant financial strain on our finances, and would severely restrict the ministry of the Church. With a commercial loan the first priority must be given to the contractual repayments on the loan ahead of any ministry expenses. By obtaining an internal loan from within the Exchange Church congregation, the EC Board would be able to balance cash flows giving priority to ministry.
To those providing a loan we want you to clearly understand that the EC Board would not be able to commit to repaying the loan over an agreed term. Nor would funds be readily available to return to you in the event of any pressing need. The EC Board acknowledge the importance of repaying the loans, and will do so as future cash flows permit .The loans will continually earn interest which will be detailed on a monthly statement.
Someone dies or EC is wound up. What happens?
If the person giving the dies the loan arrangement they setup with EC would continue as is and the repayments would go firstly to their surviving spouse and if they don’t have a spouse it would go to their estate.
If in the extreme most unlikely scenario that Exchange Church ceased to exist the loans would be repaid as funds became available from the winding up of its financial affairs. Exchange Church would own the asset of the land which if sold would provide the funds to pay back the loans. If Exchange Church was wound up and was unable to raise sufficient funds from its assets to cover the costs of those loans, what could be paid back would be done proportionally to each of the loans received. The remainder of any outstanding amounts owed would a loss to the person who gave the loan.
We have a responsibility to lay out the extreme situations before anyone gives a loan. Considering the vitality of Exchange Church, which has been established now for 11 years, it is considered that this extreme situation would be most unlikely.
What are the steps in giving a loan to EC?
We will guide you through the process and at any time before, during or after establishing a loan to EC, you have any questions contact Doug Andrews or Stephen Hickingbotham who are responsible in managing the loans. All communication and information shared with these two men will be kept confidential. The EC Board will only receive the figures, not the information or people involved.
- Step 1 – Use the Secure Contact form to either ask any questions or to inform us of the amount you can make available to loan to EC or speak to Doug / Stephen directly.
- Step 2 – After informing us of the amount you are making available to EC both Doug & Stephen will sit down with you to discuss the specifics of the loan to ensure you fully understand the arrangement of the loan with EC.
- Step 3 – A document will be drawn up stating the amount of the loan given to EC, the conditions of the loan that was discussed at the sit down and terms of the loan. This document will be signed by Doug Andrews as the treasurer and Stephen Hickingbotham as the Elder / Secretary of EC, as well the person giving the loan will sign. The person giving the loan and EC will each get a copy of this signed document. This document is confidential and will be secured appropriately and not for any other eyes except for Doug, Stephen and yourself.
- Step 4 – We do not require the loan to be transferred to EC until XX/XX/XXXX. Once the loan is established the person giving the loan will receive a statement within the first week of the month for the previous month in which the statement will have the opening balance, interest earned in the month, the rate of interest, any payments made paying off the loan and a closing balance.
Do you have more Questions?
Please contact Doug Andrews or Stephen Hickingbotham with any questions you have so that they can give clarity to your questions.