Responsible Church Financing
The “key” to determining how much the church can comfortably borrow is the Capital Campaign.
Things to think about financing a Ministry Project-
- A church can expect an initial capital campaign to result in 3-year pledges of 1 1/2 to 3 times their normal annual giving.
- The second 3-year capital campaign will often be 80% to 85% of the initial campaign.
- The size of the capital campaign is important, but so is the balance of pledges. In other words, a capital campaign that has five $100,000 gifts is better than a campaign with one $500,000 gift.
- A single large pledge creates a “concentration issue”. The bank will probably want additional details on this pledgor.
A church typically collects 90% of the total pledges.
- Standard amortization for church loans is “interest only” during the construction phase and a 20-year amortization on the long term loan.
- The loan term is often 7 to 10 years
- Construction loans are advancing loans that advance to pay contractor’s draw requests.