Share Financial Services, Inc.
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    Bonds

    Q: What are church bonds?
    A: Certificates of indebtedness sold by churches to obtain funds for capital needs (i.e., purchase property, build or renovate facilities, refinance debt). The church is the borrower and the bond purchasers (many times the church members) are the lenders.

    Q: Are church bonds insured or guaranteed?
    A: Neither; the bonds are mortgage bonds and are secured by the church property.

    Q: How does the church repay funds borrowed through bonds?
    A: The church designates a portion of its income for deposit into a special bond repayment account, held by an independent corporate trustee, similar to a conventional loan payment. Such funds provide for payment of interest when due, and principal upon maturity.

    Q: How is the interest paid?
    A: With simple interest bonds the investor receives interest payments every 6 months. With compound interest bonds interest is compounded every 6 months and the investor receives principal plus accrued interest at maturity.

    Q: Do church bond interest rates fluctuate with market conditions?
    A: No. They are fixed rate investments.

    Q: Are fees or loads associated with buying?
    A: No. The investor never pays fees, loads or commissions.

    Q: When do bonds mature?
    A: A portion of the bonds normally mature every 6 months during the life of the bond issue. A schedule of maturities provides specific maturity dates. The church has the right to redeem any bond prior to its scheduled maturity.

    Q: Is the interest earned taxable?
    A: Yes, as ordinary income on an annual basis. However, IRAs may be used to defer taxes. Other tax planning techniques may enable investors to significantly reduce or, in some cases, avoid these taxes. Investors should consult their tax advisor regarding their individual situation.

    Church Bond Programs

    Q: What are the 3 basic types of bond programs available through Share Financial Services?
    A: Directed Bond Program – Most utilized because of low cost and designed to sell all bonds to church members, their families and friends.

    Directed Bond Program with Brokerage Option – Designed to offer a portion of the church’s bonds (at its option) through a broker to investors outside the church after sales to members and church friends are completed.

    Fully Brokered – Completely underwritten and designed to provide the option of financing with no membership involvement, as the broker sells bonds to investors not associated with the church.

    Q: How do bank loans compare to bond programs?
    A: Bank interest rates to churches are generally adjustable and above prime, and do not encourage church participation or benefit members financially. Bonds offer fixed rates over the length of the financing and are usually sold at average rates below those available from banks. Additionally, bond programs encourage membership involvement and reward participation with a rate of return higher than most alternative comparable investments.

    Q: How much can a church finance?
    A: Limits are determined by established underwriting criteria that include (but are not limited to) the following:

    1. Total church debt does not exceed 4 times allowable annual income.
    2. Annual principal and interest amortization does not exceed 35% of undesignated contributions for the most recent fiscal year.
    3. Total debt does not exceed 75% of the value of the collateral securing the bonds.

    Q: Who determines the interest rate on the bonds?
    A: Directed Bond Programs – Share makes recommendations while the church ultimately determines interest rates.

    Fully Brokered Programs – Determined by broker and based on current market conditions.

    Q: What is the length of repayment?
    A: A typical Share program establishes church debt repayment over a period not to exceed 20 - 25 years.

    Q: Does the church have a choice of repayment plans?
    A: Yes. Flexible plans may provide for fixed payments for the life of the bond program or allow for graduated payments during the program’s early years.

    Q: How does Share Financial Services implement a bond sales program within the congregation?
    A: Bond investment opportunities are communicated through letters, brochures, bulletin inserts, announcements, and church-wide information meetings that allow members and friends to ask detailed questions. Bond sales are conducted by prospectus, providing details pertinent to the church and bond program.

    Q: Is it advisable to use a bond program in conjunction with a capital stewardship program?
    A: Yes. Complementing rather than conflicting, a bond program can often make up the difference in funds needed following completion of a fund-raising event.