4 The funding

The funding 4

1. Where does the money come from? We will need to work with you to establish how much finance is already available, so that any “gap” in funding can be clearly seen. The gap may be bridged by grants (from outside funders) and a decision may be needed to decide who will apply for these.

2. Smaller projects Funding for a small project may be readily to hand or can be underwritten by gifts that are promised (i.e. pledges) from your church members. This would apply to projects up to £50,000, but would be dependent on the size of the fellowship. Sources of funding can include:

a) The fellowship itself through: i. A building fund established over a few years; ii. Additional funds the church may have (e.g. from legacies or in general funds) and iii. One or more gift days for sacrificial giving.

These means of raising funds are suitable for gift aiding.

b) Loan from us. With funding up to £50,000 we are able to secure money through a loan arrangement with have in place, but this has to be repaid over five years. Even though this is at a low interest rate, it may be too much for you to repay (usually through an increased rent) in such a short period.

c) Grant funding from us. This is limited, as we do not have a lot of surplus funds. However, sometimes funds are available.

d) Gap funding from grant providers if possible. You may wish to fundraise. Only minor amounts tend to be raised from church fundraising activities, and it is better to consider using a fundraising consultant to apply for funds from local and national grant funding bodies. One typical source of grant funding can be from local landfill operators through the Landfill Communities Fund. These can be found through the Entrust website: www.entrust.org.uk. You may already be aware that Church Growth Trust does not allow Lottery Funding to be used on our buildings.

3. Larger projects In a project costing more than £50,000, it is likely that there will need to be an element of raising funds through substantial grants and a mortgage. Grant funding can take up to 12 months (or longer) to secure. This is because many charities that provide grants normally have only two or three meetings a year to decide which projects will get grant funding. Therefore, if a meeting is missed by a project, then the wait until the next grant meeting could be between four and six months. Using a fundraising consultant can be very helpful and we can suggest one to help. There is also a briefing paper on our website on “Fundraising for major church building projects”, which is helpful reading. A mortgage application will need to be made by us, as we own the property.

A further scenario to address may be how the project goes forward in the event that no grants are forthcoming to fill the gap in funding. This may mean CGT making funds available as an investment in the property with an agreed payback rate which will need to be met by the church through an increased rent.

We may also be able to provide funds for major projects (£50,000 or more), but this would normally be through a mortgage. A mortgage

can either be on the property with the building project or sometimes on another of our properties. The mortgage would need to be repaid within 15 years and the interest rate is likely to be variable. This would be added to the existing rent for the property and would be changed (up or down) depending on the variable rate of interest.

4. VAT Many churches think that VAT can be reclaimed or is not payable when charities carry out building projects. This is generally not true. There are however some exceptions, including work on the fabric to a listed place of worship where VAT can be reclaimed. There are also cases where work to a building is zero-rated for VAT. These include providing access for people with disabilities (e.g. new ramp or accessible WC) and where a new building or “independent annex” is built and used for a relevant charitable use. VAT rules are complex and it is worth getting advice on VAT at an early stage, as it may influence how you design the building and will certainly influence the overall costs.