Posted on: October 17, 2008
It is important that church leadership carefully consider how much their church can afford before borrowing any amount of money. There are several key figures that a Foundation Capital Resources loan consultant will look at to help determine how much the church can borrow without negatively impacting the daily operational needs of the ministry.
What is the annual undesignated (tithes and offerings only) income of the Church?
It is recommended that a church’s loan payments do not exceed 30-35% of annual general fund income.
What is the value of your collateral?
It is a sound practice not to borrow more than 75% of the collateral value.
What do you pay to all staff in salaries and housing allowances?
The staff salaries make up the rest of your fixed expenses for the year (not variable, like activities or ministry budgets), and are taken into account when analyzing your church’s borrowing capacity.
Once the consultant has these numbers, he can give you a suggested range of what your church can afford. When you do apply for your loan, you will need to have three years of income and expense statements ready to submit with your loan application. These financials will be the key in qualifying for your loan.
Dave Blattner
Consultant
Foundation Capital Resources