CDS Church Building & Capital Campaign Consultants » Church Finance

Pastors Caught Between a Rock and a Hard Place

admin — Thu, 13 Aug 2009 20:49:00 +0000

Last year, you may recall that the bottom fell out of the economy.

According to a survey conducted by Brian Kluth of over 1,000 churches, 29% of the responding churches reported giving was down in 2008, and 53% of churches reported giving was behind budget for the first quarter of 2009. The amazing finding was in the face of these statistics, only 14% of churches made cuts to their 2009 budget. At face value, this would seem to indicate that at at least 15% of churches are going to be faced with severe budget shortfalls this year.

However, if the 53% of churches who were behind budget early in the year don’t architect a financial turn around, many of them could be seriously behind budget for the year. This could put a number of churches in the position of needing to take some drastic and painful steps later this year or early 2009. One thing is certain, no pastor or board wants to fire staff or reduce important programs and ministries. One might consider this situation to be “the rock.”

Churches that are having a hard time meeting budget, are struggling to pay mortgages, or can’t afford to hire needed staff have only three options: reduce expenses, increase giving, or a combination of both. Two of the three solutions depend, in whole or in part, upon increasing giving to the church general fund. This brings us to the “hard place”; the Lilly Endowment Studies report that 85% of pastors feel uncomfortable and/or unequipped to preach on giving.

The apostle Paul wrote in Romans 10, “How then will they call on Him in whom they have not believed? How will they believe in Him whom they have not heard? And how will they hear without a preacher?” The same question might be asked about giving; how can anyone expect to increase giving in the church if 7 out of 8 pastor’s are unwilling or unequipped to preach on biblical stewardship?

The Kings James Bible has 64 verses that mention hell, and 334 that mention love, however there are reportedly over 2,000 verses (depending on the source quoted) that deal with money and possession. Pastor Randy Alcorn’s book, The Treasure Principle, puts the number of these verses at 2,350. Now there are those who will dispute that number, and it is certainly open to debate, but even if the number of verses was overstated by 100%, there would still be 3x more verses about money and possessions than love and hell combined.

Being unwilling to preach and teach on money is not a new problem. Malachi begins in chapter 1 by rebuking the priests for failing to properly oversee worship (particularly the offerings), and failing to properly instruct the nation in God’s Law. He goes on to call the people to repentance, not the least of which was the famous “Will a man rob God? Yet ye have robbed me. But ye say, Wherein have we robbed thee? In tithes and offerings.”

So what are pastors to do when they feel caught between a rock and a hard place?

The answer is to clearly and unashamedly preach and teach on biblical stewardship and not be afraid to challenge the people to respond. In 1 Chronicles 29:5, King David, after proclaiming his financial support for the building of the temple then clearly challenges the people to give by boldly asking, “Who then is willing to consecrate himself this day to the LORD?” David clearly threw the gauntlet down and the people responded.

Pastors and church leaders who wish to become equipped to lead their church in biblical stewardship, should consider the Dynamic Giving Toolkit. Pastor testimonials report increases in giving of 10-30% the first year and double digit increases yearly thereafter. The web site asks a very good question, “What would your church do with 10-30% more money?”

The core of the program is the book, Pastor Driven Stewardship by Dr. Rod Rogers. Used by over 1,000 churches in 13 countries, these materials have transformed the members and the giving of churches around the world. If your church needs to retire debt, hire staff, expand ministry, or you just want to avoid painful budget cuts, we think these stewardship materials will teach, equip and challenge you to lead your church in biblical stewardship.

Post a comment and let us know what your church could do with a 30% increase in giving…

A Wise Quote, Still True Over 100 Years Later

admin — Tue, 11 Aug 2009 18:07:00 +0000

I love this quote. It is appropriate in so many circumstances, not the least of which is in church design and construction.

“There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey.” – John Ruskin

For more sage words, see these John Ruskin Quotes.

Church Financing – Still a Tough Market

admin — Tue, 02 Jun 2009 19:28:00 +0000

Churches continue to have difficulty getting the financing they need for buildling or relocation. We have seen any number of churches that should be able to get financed turned down by lender after lender. Many churches that are getting turned down for financing today could have been financed a year ago with exactly the same financial statements. The biggest impediment to financing is inadequate cash flow – not enough money left after expenses to service a mortgage. Unlike previous years, lenders are not willing to wager that the church will reduce discretionary expenses to service a mortgage or increase income because of growth. Today, lenders want to see 6-12 monts of financial history showing a cash surplus sufficient to cover a mortgage.

Many churches are qualifying for loans, they’re just qualifying for significantly less than last year, and less than they need for the church plans they have. For churches that cannot qualify for as as large of a loan as they need in order to build, they need to raise the difference in cash.

There are three things that a church can do to improve cash flow. The church needs to apply a sharp knife and cut expenses, it needs to faithfully preach and teach about giving and stewardship, and it needs to run a capital campaign (which will also help with coming up with the cash difference between what they need and what they can borrow).

Cutting expenses is difficult, but a necessity for many who want to build. Trimming expenses and increasing income and cash on hand through a capital campaign is the financial answer to many of today’s church financing problems.

The Year of the Church Capital Campaign

admin — Thu, 12 Feb 2009 21:01:00 +0000

The banks have money to lend, they just don’t seem to want to do it. This week a number of the largest banks were called before Congress who basically told them to make more of the bailout money available for loans. Some lenders have just stopped lending to churches while others are setting the bar so high, that if you can qualify for the loan, you probably didn’t need it.

The money is out there, its just not as easy to get. Banks are requiring many times the level of documentation and are lending less. A year ago, a church could reasonably expect to borrow 80% of the appraised value of a completed project (80% Loan to Value or LTV), today if you are fortunate, the lenders may lend you 80% of the project cost (as opposed to project value) and some lenders are talking 60% and 65% loans.

As one lender recently stated to me, “cash flow is King, and cash on hand is Queen.” What many lenders will require to see today is at least 20% of your project cost in cash and a monthly net positive cash flow that is 125% of the loan payment. These criteria make it very difficult for the church to borrow today without significant and time consuming preparation. To qualify for a loan, the church needs money in the bank and a history of positive cash flow. Most churches are not in this situation, even though they have an immediate need to build.

There are three things a church can do to prepare that will help it become qualified to borrow for construction:

1. Reduce Expenses. As the past treasurer of my church I can assure you that almost every budget can be cut, often dramatically. It’s never easy, but it can be done. The good news is that trimming the expense side of the ministry requires only commitment and a sharp knife.
2. Increase Income. You need to have the largest possible gap (positive, that is) between income and expense. Increasing income through tithes and offerings is 50% of that battle.
3. Increase cash on hand. Put a line item in the budget for debt retirement even before you get a loan and put the money into savings. Add to this amount whatever you can by increasing giving and decreasing expenses.

Increasing income and cash on hand can both be accomplished through a church capital campaign. (Follow this link to learn more about a church capital campaign. Historically, the vast majority of churches have waited until they were about to build or were in the process before beginning a capital campaign. I believe that many churches that need to build now will not be able to get financing and begin construction until late this year or even this time next year because they cannot meet the new lending requirements of cash on hand and cash flow. Although the church may have equity, even cash equity, if they cannot show a history of positive cash flow, they probably will not be able to get adequate financing.

I believe that many churches are going to come to the hard realization that they cannot get the financing they need and that to qualify will take them many months of demonstrated financial change. I believe we will see a large number of churches want to enter into capital campaigns very soon so they may build next year. Remember, the banks will want to see 6-12 months of reduced expenses and increased giving (due in large part to a church capital campaign) before approving the church loan. The wise church will plan ahead and get their campaign underway as soon as possible. To this anticipated need, we are bringing on additional staff and looking at creative and cost effective ways to help churches execute their capital campaigns.

Should Your Church Build In These Times Of Economic Uncertainty?

admin — Thu, 02 Oct 2008 20:25:00 +0000

I am hearing this question a lot these days, “Should our church build given the economic situation?” While a specific church situation may otherwise dictate, I believe that the general answer is that it should, if certain conditions are true.

Here’s my premise. God is bigger than any economic crisis. He’s bigger than Fannie Mae, Freddie Mac, AIG, and Wall Street. Sadly our lives don’t reflect what our money reminds us. Our forefathers were wise enough to know not to trust the money, that is why they wrote a reminder to us, “In God We Trust”, on every bill.

In 2 Corinthians 9:8 Paul says, “ And God is able to make all grace abound to you, so that always having all sufficiency in everything, you may have an abundance for every good deed;”

And Jesus said, “Therefore do not worry, saying, “What shall we eat?’ or “What shall we drink?’ or “What shall we wear?’ For after all these things the Gentiles seek. For your heavenly Father knows that you need all these things. But seek first the kingdom of God and His righteousness, and all these things shall be added to you.” Matthew 6:31:33.

We have an abundance for every good work, – not sometimes, but always! No one is going to lose their house or go hungry because they gave to the work of the Lord with a joyful heart as they respond to the leading of the Lord. Better to trust the promises of God than our feelings about our present circumstances.

What a great witness, when the entire country is pulling back, for a church to be seen growing forward! I believe a church can, and should, step out in faith and build, regardless of the world’s circumstances, if the following conditions are true.

There is a real kingdom need to build. Not “want to”, “would like to”, or “wouldn’t it be cool if”, but “you need” to build. This means you are out of room and cannot accommodate the souls that the Lord is sending your way (i.e. you either build or put out a “no vacancy” sign) or it is the long-term and deeply held conviction that you are called to a ministry that you cannot provide for in your current facilities. Your church leadership and church body as a whole need to pray long and hard about the need to build and be in overwhelming concurrence (80% of more) that you truly believe you need to build.
Your church continues to see growth (the exception would be there is just no more room to grow and visitors don’t come back).
You know what you need to build and what you can afford to build, given the current finances of the church. This is best accomplished through a needs and feasibility study which will not only answer these questions, but will also be able to gauge the church’s readiness to build.
Your church as started or will be soon starting a capital campaign. A capital campaign is a key element in a church building program, and should be begun in advance of the construction. The benefits of a church capital campaign are too many to list here, but one of the advantages is that it will objectively determine whether the congregation will financially support a building program.

The bottom line is this truth; Lord, Your will shall not take me where Your grace will not sustain me. God’s grace is sufficient to meet our needs and accomplish His purposes.

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Church Capital Campaign Horror Story

admin — Tue, 30 Oct 2007 14:35:00 +0000

For many churches, it is the season of the capital campaign that will help finance the construction of the church building. For the world, it is the season of horror as it celebrates Halloween (don’t get me started on that track). For some unlucky few, it is the intersection of both – a capital campaign that turns out to be, if not a horror, then far less the spiritually and financially uplifting event that it should have been.

As a capital campaign consultant, I hear the good and the bad about church’s experiences with their campaigns. Sometimes its enough to make you want to cry, or at least cry out in anger and frustration. Today I heard from a church who spent $50,000 on [just] capital campaign services from a well known consulting firm with a short name. The church did not feel they received the the promised or necessary attention or focus of their consultant. The church soon realized that the campaign was in trouble and when they reportedly contacted the firm, they were promised printed materials and follow-up visits, none of which materialized. The end result was the church was left much on its own and raised about 25% of what the consultants told them they could raise. The church is considering asking for some of its money back, as the consulting firm did not deliver on its promised services.

I hear variations of this sad song over and over, perhaps with a different refrain, but always the same chorus; “we paid a lot of money and feel we got very little personal attention for the money spent.” Over and over again I hear churches say the results did not live up to the sales pitch. Churches that were wined and dined and inundated with fancy glossy sales packages often felt somewhat abandoned when it came to delivery. A word of warning – it seems that many firms are better at marketing than performing.

Before you get the wrong idea, I do NOT mean this as a condemnation of capital campaign services. A capital campaign is an effort that produces both spiritual and financial benefit! The church will typically experience much better spiritual and financial results when it hires a consultant. An experienced consultant should be able to tailor the best practices developed from other church’s efforts into a capital campaign to meet an individual church’s needs. Speaking from my own experience as both a client and a consultant, the church should get experienced outside help for its campaign. There are good consultants that can deliver entire completed campaigns for less than just the consulting fee charged by some of the “big firms”.

I will also say that, regardless of the size of the company, the church should not “buy the company”, it should “buy the consultant” . It’s important to know your consultant and how many projects he or she will be working on at the same time as your project. It is also important to know the spiritual “fit”. for as it says in 1 Thes. 5:12, we are to “know those who labor among you”.

If you have your own capital campaign story, I encourage you to share it as a comment to this post.