What Can We Afford?

September 21, 2008

The one thing paramount in most churches minds is; “What can we really afford?”, “How can we pay for this?”  The money question looms large for most pastors, leadership teams and congregations.  It often makes even starting to think about building or adding on to facilities like trying to climb Mt. Everest! 

As much as it is important to walk through the steps of “Visioning” and “Master Planning”, it is equally important to plan for the financial picture.  The first steps need to be around the Visioning process and then ground those results in the realistic financial capacity of the church.  We have discussed “Visioning” in our article on “Ministry Driven Design”.  That is a great place to start.  For now let’s focus on affordability and financing. 

Let’s look at key items of a church’s financial picture:


Get your house in order. 

·         Have your Vision and Mission Statements written down and be prepared to explain how your financial picture reflects those statements.

·         Make sure you have accurate and up to date records of your membership (regular attenders is sometimes accepted), attendance in various areas of ministry

·         Clear financial statements.

·         Deal with any issues of credit or delinquency.  

·         Make sure your church bylaws are written to reflect adequate checks and balances with accountability.


Pre-qualify your church based on the industry standards of borrowing (project cost).

·         Have a clear budget that shows your fixed expenses (payroll, operations, debt/lease and rent/existing mortgage) and your ministry/missions expenditures.   Your fixed expenses should not be above 75-80% of your income.  Below 75% is really the most practical. 

·         A payment should not be above 25-28% of annual income.

·         A loan amount can be between 1 ½ – 3 times the size of the annual budget based on the previous 2 calculations.  Ie. Take 25% of annual income/budget and that would equal a future payment.  Then extrapolate that to what could be borrowed based on length of loan and current interest rates.

·         Add in any capital campaign fund raising.  Depending on whether the campaign is run by the church or an outside firm, churches usually raise approximately 2-3 times the annual budget in pledges.   Add in, also, any major contributors special contributions.  There are some variables based on the kind of project – trying to raise funds for only administration space or to pay off existing debt usually do not raise as much as children’s education  or new worship space. 

·         The end result is an approximate amount of funds available for a future project.  Remember, this only a loose prequalification.

·         Make sure your architect and potential builder are aware of these numbers, so that they can help design and build a project within your ability.  There is no point is spending money towards a design that is not possible based on your financial capabilities.


Explore your options on types of lenders.

·         Traditional Banks

Traditional Banks can be very helpful to a local church if there is sufficient relationship established.  The difficulty is that banks generally look at the church through the same lens as a business that operates for a profit.  

·         Church Bonding Companies

There are many reputable church bond companies in the market.  They offer 1st mortgage bonds to individuals within the church and in the States that the bond company is licensed.  They tend to understand church finances better than traditional banks because they understand how not-for-profit corporations receive and spend their monies.  They also offer the opportunity for a church to invest in its own project. 

·         Church Mortgage Companies

They are like traditional banks in their source of funds.  They will ask the same questions and expect the same documentation of financial and numerical records.  They will, however, like a church bond company, tend to understand church income and expenses in a more favorable light.


Questions that are often asked by banks and bond companies

They will ask the same questions of the church that they would ask any company.

Questions beyond what your assets and liabilities are. 

a.       They will want to know if you are ‘making’ money and growing in numbers of regular attenders. 

b.      They will want to know your governmental structure and if it is sound. 

c.       They will want to know if you have plans for succession in leadership and if the church has  a stable history.  These questions are good and should not be seen as adversarial. 

Putting the financial picture in place is not as much complicated as it is a detailed process.  Draw on any banking expertise you may have in the church.  Do not underestimate the power of your God-given Vision to propel you forward in any fundraising.  Bricks and mortar can motivate.  Ultimately, it is the vision that is planted in a congregation’s heart that will cause them to reach out in faith and move forward. 


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