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A revealing study of U.S. churches by our sister publication Leadership journal takes a look at church debt. In this, the second of a three-part report on church debt, we look at how widely church debt is used, and the average level of indebtedness for churches of different size. The next report will highlight the benefits of debt.

Church borrowing is common. More than eight in ten (84 percent) respondents said their church is, or has been, in debt. Currently, 54 percent of all churches report some form of debt, but this varies with church size. Only 32 percent of small churches (annual budget up to $100,000) carry debt, compared to 69 percent of large churches (annual budget over $500,000).

The amount of money a church borrows also depends on the size of its budget (see Graphic 1). The median debt is equivalent to 64 percent of the annual budget. However, large churches typically have a loan balance of $1.1 million on a median budget of $957,000, resulting in a debt ratio of 115 percent. Compare that to medium size churches with just a 25 percent indebtedness ratio.

Does a high debt ratio mean that more of the annual budget goes to pay off loans? No, not at all. Small churches with debt apply 16 percent of their average budget for loan repayment while large churches, with the highest debt ratio, commit an average of just 11 percent of their operating budget to debt retirement. Another study is needed to uncover the reasons for this unexpected result.

The most common type of debt is a bank loan or line of credit, which applies to nearly six in ten churches (57 percent). A third of churches in debt have a mortgage, one-fourth have a loan from their denomination, and one-eighth (12 percent) hold debt in the form of bonds. Of the four loan categories, mortgages have the largest average balance due (see Graphic 2) and bonds have the smallest balance.

In 2002, 1,000 surveys were mailed to pastors who subscribe to Leadership journal or Christianity Today magazines and 410 were returned, for a response rate of 41 percent. With a sample of this size, results are considered accurate to within plus or minus five percentage points.

To order the complete Research Report on Church Debt, on which this article is based, visit www.BuildingChurchLeaders.com and click on Church Research.

Previous Special Reports can be found at America Online Keyword: Your Church, or www.christianitytoday.com/cbg/features/report.html.

John C. LaRue, Jr. is vice president of Internet research and development at Christianity Today International. He may be reached by e-mail at yceditor@christianitytoday.com.

Copyright © 2003 by the author or Christianity Today/Your Church magazine.
Click here for reprint information on Your Church.
May/June 2003,Vol. 49,No. 3,Page 80

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