Churches generally use debt to fund capital projects or building expansions that enable them to grow and expand ministries. Assuming that your church has a surplus operating budget [spending less than taking in each month] and have a good financial history, our recommended guideline is to borrow no more than 3 times your annual general fund income and to not exceed a debt service ratio to income of 30%. In addition, we would want to see a healthy working capital reserve fund (3 months operating expenses) set aside and a substantial cash down payment on the project, in the range of 25 to 30%. Of course, the financial lender will have final say in how much money can be borrowed for a project looking into things such as current budgets, past financial statements and loan to value on the project.
Have more questions? Submit a request