How Much Debt Is Healthy For A Church?

By Landon Yeager, Senior Vice President / Finance

Taking on a church-wide loan can be a daunting experience, especially if it is the first time for your church.  As your congregation grows, however, it may be a necessary step in maintaining building capacity and further reaching the community. We want your church to be equipped with the wisdom necessary to embark upon this calling. Here are a few helpful tips to consider:

Know your trends.

Upward trends in giving and attendance over a 3-year period are positive indicators of the financial health of the congregation. However, while upward trends are typically positive indicators, they are not the sole indicator of the church’s ability to borrow. Churches that have experienced negative trends, and understand them properly, may not necessarily be disqualified from being able to borrow. For a clearer understanding, speak with a prospective lender to gain a better idea of your individual church’s borrowing capacity.

Know where your money is going.

In general, no more than 25% of the church’s monthly tithes and offerings should be allocated to repayment of debt. However, do not be discouraged if this is not the case right away; it is quite common for churches to make budget adjustments in order to accommodate for new loan payments.

Ultimately, the primary purpose of a church is to make and mature disciples, not to make debt payments on a building. If a proposed loan is financially unsustainable in the long run, it may risk hampering the church’s primary mission in the Kingdom. Be prepared to adjust your budget to service debt and continue to fund the ministry and mission of the church.

Know your limits.

Too much debt can have a crippling effect on a congregation. Even with enough cash flow to service debt, some churches find themselves relying too heavily on a few generous donors.

Churches can avoid this by using caution and discernment when discussing with prospective vendors. Often, architects will design projects that exceed the church’s borrowing capacity, driving the congregation to scour for additional funds.

We hope these tips will help your team determine whether you are able to borrow, and how much you can afford. If you have further questions or would like to learn more, feel free to contact us at (844) 273-7713. Our team is dedicated to supporting the financial and spiritual health of your church. We would be honored to help.