10 Clues To Know Church Debt Is Right

If you are one of my good stewardship friends and are cringing at the title of this blog, please forgive me and read on. Debt is a very polarizing issue, no one is really for it, but some are willing to leverage it. Then, others leverage it way too much and get into big trouble. To be clear, I am not a fan of debt, but I understand it. I have watched more than one church grow from a few hundred to a few thousand simply by engaging debt for a season while building the right facility to expand ministry.

Here are some hints from my experience with many churches staring down the debt decision. How do I know when it is ok to engage church debt?

  1. Your current church debt load is less than 1x your annual budget. This should also be accompanied by a growing sense of financial freedom with consistent annual revenue growth.
  2. Your cash reserve amount is 3-4x your monthly expense needs and will not be depleted by the decision to pursue new debt.
  3. You have been consistently budgeting and spending below revenue. This means every year your budget spending plan has been less than previous year giving levels and you have been strategically growing this margin every year. A minimum annual margin number would be expenses at 90% of revenue.
  4. You have cash set aside for all upfront developmental expenses and down payments related to the next capital project.
  5. You can cash flow the debt payments with current budget giving. In other words, your new debt repayment will not be funded by money raised outside of normal budget giving.
  6. You have a short term plan to repay the debt ahead of schedule. This may or may not involve a capital campaign.
  7. Your engagement of debt is practically unavoidable. Meaning you are in multiple services and have maxed out all creative planning opportunities before you.
  8. Your next capital project is the right project that will lead to exponential church growth because this pattern exists in your church.
  9. Your leadership and members are 100% behind this next step.
  10. You are not attempting to use debt to turn around a declining or unhealthy situation.

I am confident this content has created some quick reactions within many readers. I am not suggesting that churches should pursue debt. For 15 years I was 100% employed in the capital campaign business, so I have seen the good, the bad, and the ugly on this topic. I do strongly believe that debt is often times engaged unnecessarily. When a church practices both strong stewardship principles partnered with a high value for biblical generosity debt becomes less of a conversation. I helped raise millions of dollars for churches who could have paid cash if they had just followed the solid financial and generosity practices. The capital campaign business is dramatically changing and the future of the church will be funded differently. If your church has not begun to move to more of a cash flow model the time to start is now. Go unleash giving today!

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