Funding Your Vision

Workable strategies for finding the building capital you need

by Stephen Chawaga

When churches talk capital improvements, they're talking big money.

There was a time when funding for such undertakings—whether a new roof, an addition to the sanctuary, or a new building on a new campus—could be raised within a congregation or through comfortable connections in the local community. Wealthy members would be asked to supplement their tithe with additional funds. A local banker, usually a church member or the friend of one, might be counted on for a favorable loan. And churches were often located in or near the center of local communities, giving those communities substantial incentive to invest in their growth.

Times have changed. Prices have risen, especially for land, and churches have bigger dreams. So, individuals, even those financially well-off, lack the resources to pay for substantial new construction. The "local" banker may actually work hundreds of miles away, and many small banks can no longer afford to finance significant building projects. Moreover, churches have moved out of the towns and cities and into the suburbs. New congregations, in particular, tend to be built in formerly rural areas where homes, but not communities, are now located. The population surrounding the church lacks motivation to financially support its maintenance and growth.

A Look at Your Options

The decline of local support for religious institutions has been balanced, however, by the growth of new resources that are available to assist the church prepared to commit to a building project. National in size and able to muster wide expertise, a diverse group of companies have achieved success in guiding churches to develop a God-given vision and accomplish it. What unifies them is a focus on meeting the needs and calling of each client.

With the help of these companies, here's a look at the varied options for supporting a capital program.

• Stewardship within the church. When a church undertakes a building project, it is not simply erecting a structure, it is deciding what God is calling it to be. This is the message preached by stewardship development firms, which assist churches in raising funds within their congregations. As Pat Graham of Cargill Associates in Fort Worth, Texas, explains, "The question is not how much the project will cost, but why are we doing this?"

Developing a vision for the building program from the outset can mean the difference between success and failure. Churchgoers cannot be counted on to increase their giving simply because a need has been identified. Bill Wilson, president of Resource Services, Incorporated, (RSI) in Dallas, Texas, says, "People don't give to buildings. They don't give to programs. They give to ministry."

Potential givers want to know who is being helped. "People give to things that touch or change lives," Wilson says.

Consultants agree that raising money requires a consensus among church leadership as to where God is taking their ministry. Prior to making any decisions, church leaders must have a clear vision for what ministry the new construction will serve and what level of funding their congregation can realistically support. Churches are typically advised to begin a campaign with a period of spiritual reflection, together with a pragmatic analysis of the community the congregation is serving. As Pat Graham puts it, it is important to ask, "What does our church do that delights people?"

This period is followed by what Graham calls a "testing of the vision"—an assessment of the church's financial picture, together with prospects for growth and an understanding of whether the congregation supports the decisions the leaders are making. This preparation may be frustrating and almost certainly will be time consuming, but the experts agree that once this foundation is laid a significant increase in giving will follow.

Before, during, and after a campaign, churches need to see that the goal in capital stewardship transcends new construction. Dave Sutherland, president of INJOY Stewardship Services (ISS) in Atlanta, Georgia, says his company offers a partnership not a program.

"Our campaigns are vision driven and transcend the natural inclination to focus on building a new building," he says. "The congregation is prayerfully and inspirationally linked to the vision and wholeheartedly embraces ownership of the dream."

iss partners with its clients to build a leadership culture and instill leadership values that will strengthen the congregation beyond the life of the campaign. "We believe that stewardship fuels the future and leadership sustains the future, so we help churches major in these areas," Sutherland says.

Bill Price of IMPAC Services in Brentwood, Tennessee, stresses another important aspect of capital stewardship—accommodating each church's individual needs. Future success in the field of stewardship, he believes, depends upon taking the time to become familiar with the unique qualities of each client and then selling those points to potential givers and lenders. A two-year-old capital fundraising company, IMPAC Services rejects the "cookie-cutter" mentality that assumes all good fundraising follows the same model, Price says.

New software and information resources are also critical to the future of stewardship services. All of the companies above, as well as The Genesis Group in Fayetteville, Georgia, are looking for ways to increase their effectiveness using new tools and methods.

• Traditional lenders. The demise of the local bank has created an opportunity for churches to take advantage of the experience and resources of national financial institutions. One bank with a long history of lending to churches is the California-based Bank of the West. It maintains a Web site where, among other things, a church can calculate its debt capacity—a term for how much the church can borrow—based upon factors including the year the church was founded and the average Sunday attendance.

Analyzing debt capacity over the Internet is just one innovative tool Bank of the West uses to compete for prospective borrowers. It also offers rapid loan approval time—usually no more than a couple of weeks—and the option of a long repayment period that can last up to 25 years.

Dan Mikes, a senior vice-president with Bank of the West's church loan division, points out that his institution's experience in financing church-related projects gives it a particular sensitivity to the concerns of congregations. For example, Bank of the West does not require its borrowers to keep a percentage of the funds being loaned on hand at the bank, as do many other lenders. Bank of the West gives churches flexibility in prepaying outstanding balances and allows them to reduce the amount of monthly repayment when, for example, the fundraising campaign concludes and the church experiences a cash-flow constriction. Mikes stresses that even though Bank of the West may be thousands of miles from its customer, it looks forward to establishing a long-term relationship that may begin with a relatively modest renovation project but eventually expands to significant new construction.

• Other financing options. When a church borrows from a bank to finance a building project it commits to repaying the loan at a fixed rate, including interest, over a period of years. But lenders are often reluctant to offer a long amortization, or repayment, period, due to concerns about the church's long-term financial health. Or they may be unwilling to commit to a particular interest rate if rates are on the rise.

In such cases, bond financing, in which investors pay the church in return for a note promising repayment with interest after a fixed period of time, may be an attractive alternative. Sometimes such funding can involve a commitment by church members. In cases where the project exceeds the scope of church resources, bond financing can be based on firm underwriting, whereby an underwriter sells interests in the project to independent investors whom the congregation must pay back.

Scott Rolfs manages the religious and school financing division of Ziegler Capital Markets Group in Milwaukee, Wisconsin, which has been underwriting church building projects since 1913. He points out that the firm underwriting his company not only allows churches to finance their building project at lower rates, but churches can also lock into that rate over a period of 15 years or more. Rolfs also notes that bank loan documents typically include restrictive provisions, like prepayment penalties, that are not part of the firm underwriting system.

Bankers note that such penalties often do not apply if the church seeks to prepay from church assets, gifts, offerings, or sources other than another financing company. They also point out that the fees charged by bond underwriters can exceed the cost of bank financing. Regardless, it seems clear that both bank financing and bond financing can be successful.

Another option for some churches is obtaining financing from a group that specializes in their type of ministry. The Evangelical Church Credit Union in Anaheim, California, for example, provides financing and stewardship consulting for the evangelical community. Other creative ways to obtain resources are as close as the Internet and the phone book. Churches embarking upon a capital fund campaign should thoroughly investigate all of these options and then carefully and prayerfully choose the path that best meets their needs.

Stephen Chawaga (schawaga@monteverde.com) practices law with the firm of Monteverde McAlee & Hurd in Philadelphia, Pennsylvania.

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