Recently, Christianity Today conducted a study of “how many churches go into debt or enter a capital fund-raising campaign to pay for new or upgraded facilities.” Here are their findings:
–Almost half of the churches studied (49 percent) report they are currently paying off at least one form of debt.
–Mortgages and bank loans/lines of credit are the most common types of borrowing.
–Twenty-six percent of churches are paying off a mortgage, and 25 percent have a bank loan.
–Church size has a dramatic correlation to borrowing. Large churches are twice as likely (67 percent) to be in debt as small churches (32 percent). The most common money source for large churches (47 percent) is a bank loan or line of credit.
–On average, churches saddled with loans appropriate 13 percent of their annual budget to debt retirement (often about $50,000). Among churches with debt, the average proportion of their budget devoted to payments is: 18 percent for small churches, 17 percent for medium-size churches (101 to 300 on Sunday mornings) and 12 percent for large churches.
–About one-third (29 percent) of churches are planning to take on new loans. The average amount churches plan to finance is $726,000. The two main reasons for borrowing are new construction (56 percent) and building renovation (30 percent).
–About one in five churches (19 percent) plan to conduct capital fund-raising in the near future. Large churches (33 percent) are four times more likely to be entering a fund-raising drive than small churches (8 percent).
–Fund-raising goals for capital expenses average $929,000 per church, which is 28 percent greater than the average amount churches intend to borrow. Average goals vary by church size: $280,000 for small churches, $800,000 for medium-size churches and $1.8 million for large churches. (TAB)
Be sure of finances before borrowing
Churches should borrow no more than 2 to 2.5 times their last year’s annual income including previously established debt, according to Gary Swafford with the Alabama Baptist State Board of Missions (SBOM).
Swafford, who heads the SBOM’s new work and church building services, offers the following advice to churches to help them determine whether they can make the proposed payments on a new
construction project.
“Since the planning process usually takes from six to 18 months, I suggest that churches use that debt limit as a goal and get a quote from a lending institution to determine what a monthly payment would be for that projected debt,” Swafford said.
“Then challenge yourself to start making that monthly payment to yourself in an interest-bearing account.”
He said that by doing this, “You are proving to yourselves that, yes, we can make that monthly payment.” Swafford added that in making the payments to an interest-bearing account, churches are “Accumulat[ing] money that you don’t have to borrow and it sets the pattern for making the payment when the debt is incurred.” (TAB)
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