1 of 4

Since a deep recession arrived in 2008, churches have operated in the most challenging financial climate since the Great Depression—an economic version of a classic biblical drought with money, credit, and confidence drying up.

Yet many church leaders plan to expand facilities. Evidence of this stubborn optimism comes from a survey commissioned earlier this year by Your Church Today and the Cornerstone Knowledge Network, which showed that 45 percent of the 485 leaders who responded plan to build within the next 18 months.

Optimism alone only goes so far. In these challenging times, success also comes from a combination of diamond-sharp vision and a grasp of all the financial possibilities.

The economy is forcing churches to envision only those facilities that are aligned with top ministry priorities. Gone are the days when a church can simply add square footage to a project and expect buy-in. Donors want to know exactly where their funds are going—and why.

Jim Sheppard, chief executive officer of Generis, a church fundraising firm, advises his clients to concentrate on the "wow" (we really need to do this), the "now" (we need to do it as quickly as possible), and the project's alignment with every other ministry of the church.

Contact a lender early and ask for a borrowing capacity analysis. There is no cost or obligation for this service, which can be turned around in a few days.

"It's fairly common to have to scale the facility to the size of the church's financial profile," says Dan Mikes, executive vice president of Bank of the West's church loan division. "I can't tell you how many times I've walked through a building with a pastor and opened up a closet door to see a foot-tall pile of blueprints that they spent $10,000 on, only to find the building was out of their reach."

The adjustment can also involve the "when." Securing a large sum of money to finish a huge project all at once may not be the wisest move. One alternative is to complete the project one logical segment at a time.

"There are things that are vital and important and things that are nice. The vital should get done first. You can add in the other elements as you are financially able," says Brian McAuliffe, executive pastor of Willow Creek Community Church in South Barrington, Illinois.

Lenders will want to see a clear picture of the financial health and history of the church to discover its realistic borrowing capacity.

"It's a little unrealistic that someone will repay a loan that's 10 times their annual income," says Frank Sommerville, a Texas attorney and CPA who specializes in non-profit law. "What can you afford? What have you been putting into savings? What sort of reserves do you have? It's important to demonstrate money going into savings and your ability to ultimately repay."

A lender will carefully examine your church's revenue and attendance trends. The guiding principle, according to several industry sources, is "cash is king, but cash flow is emperor." Does a church have a "historic cash flow" going back two to three years to indicate that it would be able to handle the loan payments? These figures will carry far more weight than promises and pledges to repay.

next page... |  1 of 4

share this page