Gain a lenders perspective on church financial health

Although the economy seems to be recovering, a lot of church leaders I talk to are still nervous about taking the next steps to grow their ministries. Even some churches that are at capacity are not sure it's the right time to initiate a major capital campaign.

In early 2012, I had the chance to talk with David Lee of ECCU about A Lender’s Perspective On Church Financial Health. During the webinar, David shared some incredible insight into key financial indicators and metrics that church leaders need to monitor to avoid a financial heart attack in their church.

Since the topic of financial health is still as relevant today as it was when the webinar first released, I want to revisit some of the wisdom David shared in the form of a step-by-step guide to improving your church financial health from a lenders perspective:

  1. Establish an annual financial check up with a lender.
    Even though your church may not be ready to take on a loan, it’s still beneficial to meet with a potential lender or industry expert for a “check up.” Much like our physical health, taking a preventative approach to our financial health is a lot better than needing treatment later.
  2. Understand the 5 Cs of your church’s credit criteria:
    • Capacity: Can you afford to repay the debt?
    • Character: If you can, will you repay the debt?
    • Collateral: If you are willing but unable to repay the debt, how will the debt be repaid?
    • Concentration of Gifts: Do you know your top givers?
    • Conditions: What are the economic conditions of your community?
  3. Understand what’s changed.
    Because of the changes in the economy, lenders have to approach their loans differently. Understanding what has changed when it comes to applying and securing loans will prevent you from any misconceptions that you have from previous experiences.
  4. Take practical steps to start building your capacity and margin.
    Some of the tips David mentioned included building liquidity, monitoring variances in budget, and establishing benchmarks and ministry measurements to keep track of your church’s financial state. More margin means more ministry potential. One of the most impactful services I have seen on this front is the financial plan offered by the Strategic Consulting Group in Atlanta.

Taking on a capital campaign is a risk for any church, especially in today’s slowly recovering economy. However, if we can learn how to approach it from a lender’s perspective, we can have a greater sense of peace and confidence in the steps God is calling us to take. It’s not easy, but in the end it’s totally worth it.

If your church is thinking about starting a capital campaign this year, I highly recommend you check out the entire webinar to learn as much as you can from David. And our most recent webinar with Brad Leeper is another valuable resource on accelerating giving within your church.

Has your church initiated a capital campaign in the past two years? If so, what was different than previous campaigns? How have you overcome the struggles along the way?

Topics: This entry was posted in Finance & Generosity

Posted by Steve Caton on Mar 4, 2013 10:47:39 PM