IX. Resources When Doing a Building Program
A. Borrowing to Build: Steps in a Decision-Making Process | B. Capital Fund Drives

A. Borrowing to Build

Steps In A Decision-Making Process

This information is for congregations and leaders, clergy and lay, who are considering significant capital improvement and the means of financing the same.

Introduction
Because there are common concerns about overborrowing and unnecessary and/or burdensome debt, the Covenant has articulated both a position and a suggested process to help congregations be wise in planning the financing for capital improvements. The presentation outlines the steps of the process and the questions that might be addressed.

Presentation
1. First determine whether the anticipated building effort is what God wills, what the vision for ministry and mission calls for, and if people are eager to follow.

2. As a congregation, ask what it can do on its own to raise necessary monies. If borrowing happens too early, the church might not let God do His work.

3. Be clear as a congregation that either building or borrowing is clearly Biblical. If done wisely, building or borrowing are not going against Scripture. At issue is what is wise.

4. Extreme care must be exercised in borrowing, especially at interest if one is to be neither overly prohibitive nor mindlessly confident. If monies for a capital expenditure, for example, can be generated before it is embarked upon, all the good. Such would be raised from God's people for God's purposes. If the former is not possible, consider next borrowing from Christian organizations. National Covenant Properties typically fulfills this service for Covenant congregations.

5. Only thirdly should a church revert to borrowing from other than "one's own people," e.g. conventional lending institutions such as savings and loans or banks. And, in any case, such a congregation must do so as wisely as possible, addressing the following sets of questions:

a. Do we really, at this time, need this new facility, resource, program? How does it fit with our understanding of God's will for our church? How does it fit with our understanding of and commitment to mission and how is it reflective of our philosophy of ministry? Stewardship is not only about money; it is also a question of time and people to who one can minister in the future. Is the anticipated building project a stewardship of a missional opportunity?

b. Where assuming debt is yet an emotional issue for a congregation, are we willing to face some countervailing realities such as

i. Each family we aren't to keep because of delaying the facility "costs" us the tithing those people would have done. If we lose five families per year because we wait, each with an average of three people, each giving at the Covenant average of $1,250 per attender, we will be losing $93,750 per year after five years.

ii. The average Covenant facility costs approximately $1,000,000 to construct. That number goes up by $40,000 per year for each year we wait and experience 4.0% inflation. Can we raise new funds that quickly?

iii. If we aren't building, we must be renting. Typically, rental costs will also go up with inflation over time. (This refers to new churches with no permanent facility)

iv. A church behaves much like people do in that momentum can be built up but very difficult to maintain if all constraining factors are not acted on in a timely fashion. Once momentum is lost, it is very difficult (if not impossible) to regain. Experience teaches that a decision to put off a facility at a time when the church is ready (and able with reasonable debt) to move ahead with usually costs the church dearly. This shows up with the people most evangelical and committed being the ones who leave as soon as they see we are putting "money before people".

c. Are we aware that we must continue established priorities and so should not redirect current sources of giving to a new building fund? Are we willing to guarantee such by establishing a totally new fund for the new venture and to monitor both with public report?

d. Are we willing to conduct a capital fund drive early in the effort for discernment of how successful we may be and how much we have to go? Are we willing to seek the best (and relatively safest) interest rates on these gathered funds before the project or building is undertaken? The church also might identify a series of successive options; if we generate this much capital, we can do such and such; if beyond that, we can plan for more.

e. Conversely are we willing to search out and utilizes the lowest interest rates on any borrowed funds? And are we committed to borrowing the fewest number of dollars, remembering that financing is part of the cost of the project and that more dollars borrowed mean more interest?

f. Are we aware of the time value of money both saved and spent? Are we hence ready to negotiate no prepayment penalty and to set repayment dates in the shortest possible time?

g. Are we willing to consult with capital fund drive experts? A rough estimate of income for a three-year capital fund drive is something between 1.5X and 3.0X current annual income.

h. Are we willing to stay within guidelines for maximum debt undertaken?

"Stress Level" of Debt Per Attender
"Easy"
"Manageable"
"High"
"Dangerous"

Established "Stable" Congregations
$0-$750
$750-$1,500
$1,500-$2,250
$2,250+

Established "Growing" Congregations
$0-$1,500
$1,500-$3,000
$3,000-$4,500
$4,500+

New Congregations (1st Facility)
$0-$3,000
$3,000-$6,000
$6,000-$8,000
$8,000+

Note that the above cautions are but "guidelines", not mandates. Variables that may alter the above include internal giving levels, congregational dynamics, morale, climate, and the current capacity of a congregation to handle debt.

i. Finally, if the congregation is considering alternative "borrowing" such as selling interest yielding securities or bonds, has it checked out all laws that apply? Every state has it own legal procedures (as well as Federal security laws) and sound expertise is needed in this area.