Banking on Black Churches

Even when they have their finances in order, African American congregations can have trouble securing loans, ministers say. Some nonprofit lenders are stepping in.

From 500 miles away, Leslie Topps’ heart broke for the Lewis Street Church of Christ.

“Of all the churches, why would that happen to them?” she said after learning that the Little Rock, Ark., congregation’s building was firebombed in the midst of protests over the killing of George Floyd. 

The church was in the midst of a $1.2 million refurbishment of its 100-year-old facility. Flames snaked up the walls and punched holes in the roof. The renovation was ruined.

Topps, an Atlanta-based publicist, grew up in the pews of the Lewis Street church. She still has the certificates she and her family members were given after they were baptized there. 

She now worships with the Renaissance Church of Christ, which moved into a newly constructed worship facility near Atlanta’s international airport in December 2018. 

Both of the predominantly Black churches—1,400-member Renaissance and 100-member Lewis Street—had attempted to secure loans from the large banks where they have accounts. Both were declined.

“An African-American church can have all of its financials in line,” said Orpheus Heyward, minister for the Renaissance church, “and still run into issues when applying for a loan.”

Before construction of its new facility, Renaissance, formerly the West End Church of Christ, owned its $2.2 million property with no mortgage, Heyward said. The church had used the same bank for 87 years and had ample funds in its account.

Similarly, the Lewis Street church had maintained accounts with a large banking chain for more than 40 years, said minister Jameel Robinson. But the church couldn’t secure a $50,000 loan to fix its plumbing.

The church’s leaders were told, Robinson said, that it was “high risk” and that the bank was “just not rendering loans to churches with small memberships.” 

“That just wasn’t a legitimate answer for me,” the preacher said.

It didn’t make sense to Doug Crozier either. He is chief executive officer of The Solomon Foundation, a nonprofit church extension fund.

“I’ve funded probably over 1,400 churches,” Crozier said. Especially in the case of the Renaissance church, “Every bank should fund that project. It opened my eyes.”

The foundation, which serves congregations identified as part of the Restoration or Stone-Campbell Movement, provided loans for Renaissance’s construction and Lewis Street’s renovation. Since the firebombing of the Lewis Street building, the foundation has launched an initiative to help the church rebuild.

THE LEGACY OF REDLINING

Since the 1930s, Black families in the U.S. have suffered from discriminatory policies in mortgage lending. 

The practice of redlining—denying financial services and insurance in a particular neighborhood based on its ethnic composition—was outlawed by legislation, including the Fair Housing Act of 1968 and the 1977 Community Reinvestment Act. 

However, housing advocates say the practice continues in more subtle ways. Black families were victims of the sub-prime loan crisis that precipitated the 2008 financial meltdown. A November 2019 analysis of mortgages by professors of law and business at the University of California at Berkeley found that Black and Latino applicants were charged higher interest and heavier refinance fees when compared with White borrowers.

(This clip from the TV show “Adam Ruins Everything” explains the role that unfair housing practices—including redlining—played in the development of suburban America and problems such as income inequality.)

The trend affects predominantly Black churches, according to a 2017 study by Indiana University. Black congregations are disproportionately represented in bankruptcy filings, have fewer options to refinance and are more likely to fall victim to predatory lenders.

Earlier this year, pastors of predominantly Black churches said they had trouble accessing COVID-19 relief funds issued through the Paycheck Protection Program administered by the Small Business Administration, according to a report by National Public Radio. 

Steve Mack, a banker with 38 years of experience making loans, said he hasn’t seen direct evidence of discrimination against predominantly Black churches, but he suspects it happens. 

“And I’m sorry to say that,” said Mack, chief executive officer of San Antonio-based Texas Heritage Bank. In the financial industry, “I know we’ve got some history that’s not particularly positive.”

Banks make and price loans based on risk, said Mack, an elder of the Oak Hills Church in San Antonio. Among the considerations for churches are the size of the congregation, the number of “giving units” (families or individuals), their history of giving and debt service—the proportion of the church’s annual giving that is used to pay existing debts.

Public relations is another consideration, said Ed White, a commercial lender who works for Texas Heritage Bank.

“The last thing a bank wants to do is foreclose on a church,” White said. “I truly believe that large banks look at church lending as unsecured lending.”

The Christian Chronicle reached out to representatives of two large banking chains, Bank of America and Regent Bank, and has not yet received a response.

MAKING CHURCHES ‘MORE BANKABLE’

White has approved loans to churches but said he’s also had to decline loans because “I couldn’t get comfortable with the financials.” 

He advises churches on what they can do to make themselves “more bankable,” he said. That includes capital campaigns for building or renovation projects that have widespread support and financial commitments from church members. 

A financing project may be more attractive to lenders, White said, if the church designs its facilities in such a way that they could be used for some other purpose—retail or office space, for example—should the congregation later sell the property.

White, who is African American, serves on the trustee board of a Church of God congregation. When his church underwent renovations, it secured a loan through a lending entity associated with the denomination. Other faith groups have similar entities that provide loans for churches within their fellowships, such as the Baptist Church Loan Corp.

Such entities are regulated differently from banks, Mack said, so churches considering such loans should be aware of the lender’s funding sources, management practices and whether or not they undergo internal or external audits. 

White also advised churches to compare the lender’s interest rates to current market rates. A discrepancy far above or below that rate could be a warning sign of mismanagement, he said.  

LOANS FOR AFRICAN AMERICAN CHURCHES

The Solomon Foundation undergoes annual audits and follows specific guidelines similar to those followed by banks, Crozier said, including minimum capital ratio (a borrower’s assets divided by its liabilities) and minimum liquidity ratio (a measure of the debt-repaying ability of the borrower). 

The nonprofit also is regulated by entities in each state where it does business, usually by a state’s securities commission but sometimes by its banking or insurance regulators, Crozier said.

Solomon has committed 20 percent of its assets to help predominantly Black, a cappella Churches of Christ, Crozier said. So far the nonprofit has funded 55 such loans, worth more than $84 million.

“They’ve got tremendous ministries, and they’re doing a great job,” Crozier said of the preachers for these congregations. “A lot of them are bivocational, which tells me of a higher commitment.”

Heyward, the minister for the Renaissance church, said that representatives of Solomon took a detailed assessment of the church’s financial health and made helpful suggestions. 

“They don’t dictate how to do ministry,” he said, “but they help you manifest the vision.”

‘A FELLOWSHIP PARTNERSHIP’

In mid-July, Crozier and other representatives of Solomon gathered alongside members of the Lewis Street church in the congregation’s gym, where the church has met since the firebombing. They donned T-shirts for Project Hope, a fundraising initiative to help the church rebuild, and made an online appeal for contributions. 

The foundation committed some matching funds toward the initiative, which has netted about $400,000 so far, Crozier said. 

Robinson, Lewis Street’s minister, said he was impressed that a lender’s CEO would make the long journey to visit the church. 

“We talk business, of course,” Robinson said, “but it’s more of a fellowship partnership.”

Since the firebombing—a racially charged incident that echoes the tribulations of the civil rights era—Robinson said he’s received “an outpouring of compassion and concern” from the community. 

Members of predominantly White churches have engaged him in conversations about what they can do better in terms of race relations. The mayor of Little Rock has reached out and voiced support for Project Hope.

Recently, Robinson and his family went on a journey, not to the Arkansas governor’s mansion or the White House to demand justice, but to The Solomon Foundation’s offices in Denver to say thanks.

“I wanted to show that same type of love that was shown to me,” Robinson said, “so we made it to the Mile High City.” 

After the firebombing and the frustration his congregation endured trying to secure funds for its future, he hopes that the “fellowship partnership” between the predominantly Black church and predominantly White lender will be a “city on a hill” for Americans of all races to see. 

“You’ve got to overcome evil with good,” Robinson said. “This has been a great journey, a learning experience. We’re making history.”

This article first ran in The Christian Chronicle. Reprinted with permission.