The solution to this question is best answered by first understanding how God has positioned your church for its current and future ministry. We encourage you to contact one of our consultants to assist you developing a customized answer to this question. When you contact one of our consultants, we will assist you in examining your church's current trends and begin to identify the steps needed to achieve the dream you believe God is leading your church toward.

As a ministry of NAMB and the Cooperative Program, we are available to provide customized consultation to your church's leadership team. Even if you plan on obtaining financing through another lender, we are here to help strengthen your church. 

To aid you in this process, and to help you understand one of the many tools we use to answer this important question, we offer the following information to help your church in its facility and finance planning.

Calculating a Safe Debt Level for Your Church

This is a question many congregations face when growing their facilities. The Church Finance Ministry (CFM) of the North American Mission Board, SBC is committed to helping churches avoid the trap of financial bondage. As a part of our no-cost consultation process we carefully examine the financial statements of those churches who seek our help. 

One of the key financial ratios that we use to help form an opinion as to how much debt a church should borrow is a tool called the 'fixed expense ratio'. 

A Fixed Expense Ratio is determined by adding together all of the annualized 'fixed costs' of the church, and then dividing that number by the church's annual undesignated income. 

'Fixed Costs' are those items such as salaries; payroll expenses; insurance; utilities; the proposed mortgaged debt payment; equipment lease obligations; church van payments; phone and internet fees to name a few. For new construction projects, we recommend a church to have a fixed expense ratio of 80% or less. Assuming a number of 80% would mean that .80 cents per undesignated dollar received by the church was paying for the 'fixed costs' of the church. Historically, we have found that at 80%, the local church typically has enough income to support local ministry and missions without needlessly having to worry about keeping the ministry afloat financially.

For established churches purchasing property or refinancing existing debt we recommend the church's fixed expense ratio not exceed 85%.

Why the difference in recommended ratios for construction and permanent financing? In construction financing, there are many risks, some known, and some unknown until they become an issue. That's the nature of risk when constructing a building. Therefore we recommend an 80% fixed expense ratio for construction projects, where the risk for cost overruns is greater than in non-construction projects, where we recommend a ratio of 85% of less. Obviously the lower your fixed expense ratio the more money your church has left over each month for local ministry and missions.

In certain high growth situations, a higher fixed expense ratio may be acceptable, but should be considered carefully. Additional financing strategies might be achieved through established capital stewardship programs. Consultant your CFM Consultant for more information on your church's specific needs.