By: Robert C. Foreman, AIA, LEED AP
Church leaders are sometimes reluctant to seek help and
advice. This seems to be especially true
when it comes to facility planning and financing. They may believe they know enough and are
wise enough to undertake a building project without seeking the best
professional guidance. Perhaps they are
unfamiliar with Proverbs 11:14, “Where
there is no guidance, a people falls, but in an abundance of counselors there
is safety.”
There are several types of professional help which a wise
church leader will seek when preparing to build:
1.
Help with finding the right property and help
with land acquisition.
2.
Help with planning, design, and construction.
3.
Help and advice with fund raising.
4.
Help and advice with financing.
Obtaining professional guidance for fund raising and
financing is as critical to the process as finding the right architect and
contractor. The wise leader should know
when to seek help and should know that the right advice and council will result
in a more successful project. They
understand that seeking the right help will allow them to be better stewards of
the financial resources of the church.
Raising Funds to Build – Excellent services are
available to help churches with capital stewardship campaigns. These services employ experienced people who
know how to help churches conduct successful fund raising programs. These services will usually help a church
raise much more than the church would be able to on its own. The capital stewardship consultant serves as
an advisor and trainer to work closely with the Steering Committee and
especially the Finance / Fund Raising Sub-Committee to help them learn how to
conduct a capital stewardship campaign. Most
church members are hardly aware of the work of the consultant who is working
behind the scenes during the campaign. Campaigns
usually consist of several phases:
1.
Initial investigation and recommendations.
2.
Training of Finance / Funding sub-committee and
volunteers.
3.
Pledge campaign conducted by volunteers and
church staff, under guidance of the consultant.
4.
Conclusion of the capital campaign and
evaluation of the results.
After the initial training and survey phase, the campaign
kicks off with a banquet or special worship service and concludes 6 or 8 weeks
later with another big event or service.
A concluding “Big Event” is usually planned during which the results of
the fund raising campaign are revealed.
Sometimes a church wide event highlights the plans for the project with
the unveiling of renderings or the showing of computer animation videos of the
proposed new facility. There are several
main purposes for the campaign. One is
to help the entire church body to better understand Biblical teachings about
stewardship and generosity and to become tithers, if they are not doing so
already. Another is to encourage members to see the need for financial
commitment to the building program over a period of three years or longer. With such commitments in hand, the church is
in a better position to evaluate member support for the project and get a loan,
if needed.
There is a right way and a wrong way to ask church members to
contribute. The campaign advisor will
help the committee and staff to understand the most effective ways to gain
member support and pledges. If the
campaign emphasizes Biblical principals of stewardship, and if leadership,
committee, and volunteers closely follow the consultant’s training and advice, if
everyone prays for God’s leadership, and if the members have been adequately
briefed on the purpose and intent of the project, the results should be a
highly successful capital campaign.
Here are some things church leaders often do that
inadvertently reduce the financial support for a proposed project:
1.
Fail to seek expert financial advice.
2.
Fail to explain to the membership what is being
proposed.
3.
Fail to show visuals of the proposed facility.
4.
Fail to clearly set forth a clear vision to the
members.
5.
Fail to explain why the project is needed.
6.
Fail to explain the cost or ask for
contributions.
7.
Fail to reveal to members the need for the
church to borrow money.
8.
Fail to generate interest and excitement about
the project.
Financing – There is a difference between financing
and borrowing. Borrowing is often part
of the way to finance a project. Not
every project requires a loan but every project needs a financing
strategy. Most successful projects
involve use of cash reserves and a loan.
Many church expansion projects will follow this pattern:
1.
Pay off existing loans.
2.
Conduct a capital campaign, asking for pledges
from members.
3.
Raise cash reserves until a significant part of
the project budget is set aside in cash.
4.
Negotiate loan terms with several lenders and
settle on a single lender. Finalize
terms of loan and gain church member approval.
5.
Avoid trying to borrow more than the church can
pay off in a reasonable time frame.
6.
Proceed with project using cash first. When cash is used up, begin draws against the
loan.
7.
Pay down the loan as quickly as possible.
The above is a common strategy. However, there are other ways to finance a
church expansion, including all cash, bond financing, and pay as you go. Bonds are just another way to borrow
money. Pay as you go means starting the
project before having a clear method worked out for paying for it. This can be a dangerous strategy. Many churches have started building projects
they could not complete.
There are many differing opinions about borrowing, including
those who believe it to be unbiblical.
There is no question that many churches have gotten themselves into
difficult financial situations by borrowing more than they could afford to pay
back. It is not the intent of this
article to explore all the pros and cons of borrowing, especially the argument
that it is unbiblical. I will leave that
to the theologians. However, there are numerous
examples of churches that have borrowed responsibly and have been enabled
thereby to move forward with a facility expansion in a timely manner.
From my observation, the least successful financial strategy
is to try to raise 100% of the cash needed and not borrow anything. It can take many years to raise enough cash
and in the meantime facilities can become more overcrowded and more
inadequate. The lack of facility expansion
or upgrades may actually stop growth.
Ministry needs may go unmet due to shortages of space and the fact that
all extra funds are being saved for the expansion project. During this time project costs will continue
to grow because of inflation. Delayed
construction always tends to increase costs.
Plus, interest rates may increase during the time the church is trying
to raise the cash. If the money does not
come in, the church may end up having to borrow at a higher interest rate, and
the overall project cost may end up being more than had they proceeded
sooner. Sometimes the all cash strategy
can actually cost more than a combination of cash and loan. This is why churches need expert financial
advice to help them sort through the options.
An expert on church financing will be well worth every penny of their fee.
The best financial consultants are the most
independent. In my opinion, the best
financial advice does not normally come from the architect, the contractor, or
from a design-builder. Advisors who are closely
tied to the design or construction process are often biased. They have a conflict of interest. Their interests tend to be with their businesses,
not with the church. The lender’s main
purpose will usually be to make a good loan from which the financial
institution will profit. Likewise, church
members, even ones in the financial industry, are not always the best judge of
what is financially best for their church.
It is always better if the primary financial advisor is completely
independent of the lender, the church membership, the contractor or the
architect. One of the big mistakes
churches make is not using an independent financial consultant and following
his or her advice.
Where does a church find an expert financial advisor? There are many advisors available to the
business community, but they may not be experienced with churches. The best source of names will come from
denominational leaders. Independent
churches can get referrals from denominational groups or other churches. Advisors often work across denominational
lines. Some larger denominations
(Baptist, Methodist, Catholic, etc.) have on-staff financial advisors available
to assist churches in their denomination.
Be sure to obtain references from consultants not tied to your
denomination.
The church financial advisor can help answer questions such
as:
1.
Is our church a good candidate for “all cash”
financing?
2.
If a loan is needed, what size loan will be best
for our church?
3.
What are the best currently available loan
terms?
4.
What are the names of the lenders who can provide
the best loan value?
5.
How much cash should we have on hand before
proceeding with the project?
6.
What length of loan would be best for our
church?
7.
Should we try to pay off our loan early?
Why would any church choose to proceed without this kind of
guidance? If expert advisors are
available who can help the church answer these questions, why not take
advantage of it? The financial cost of a
poor choice of lender could be substantial over the life of the loan. The consulting fees paid to a good financial
advisor will be tiny compared to the cost of taking out a loan with the wrong
lender, paying higher interest rates than necessary, or borrowing more than the
church can pay back. Paying a reasonable
consulting fee to an independent financial consultant should result in the best
possible financing arrangements. This is
just good stewardship of the church’s financial resources.
Conclusion - Churches need expert advice for both
raising capital funds and financing a project.
Churches that use capital stewardship consultants usually raise more money
than those who take the “do it yourself” approach. Churches should seek expert financial advice
from reliable sources. The best sources
of financial guidance for churches are independent advisors, specializing in
helping churches. Seeking this kind of
help and advice is good stewardship of the church’s financial resources. Successful projects will be the result when expert
financial advice is followed.
Bob Foreman
is senior principal at Foreman Seeley Fountain Architecture, an Atlanta firm
specializing in the design of church and school facilities. Bob is a member of
the American Institute of Architects and is a LEED Accredited Professional.
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