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Chuck:  Hello everyone! Today rather than hearing my thoughts on faithful stewardship, we’ll hear from a well-loved veteran in the area of church lending.  Dennis Moses served churches for over 26 years. Earlier this year he started his own church-consulting firm and went to work as the managing director for Church Capital Resources in Fort Worth.

Dennis, I have been dying to ask you: what is the one question you get most often?

Dennis: Pastors and business administrators often ask me: “How much can we borrow?” When the question should be: “How much should we borrow?”

Chuck: So, how do you help them answer that question?

Dennis: First of all, the one asking usually has a sense of urgency and it is a very important question to ask.  So, I begin to explain to them that every lending institution will always look to the history of the church; focusing, especially, on the past three years of attendance records, annual giving, budgets and current financial statements. Lenders want to see how much of an annual mortgage payment the church can make.

Chuck: How is this done?

The analysis is done by taking monies left over after ministry expenses or in the secular world that would be “net income” to which interest expense on a current mortgage, depreciation and any nonrecurring expenses (one time gifts) would be added. An example would be: replacing a HVAC unit in the church. The total sum of these items would be monies that could be directed to make the mortgage payment. Lenders will take the sum dollar amount and divide this total by 110% to verify the church can afford to make the annual payment, allowing for a small cushion.  This calculation provides the lender with an annual Debt Coverage Ratio (DCR). Check the current interest rate on a church loan for a twenty-five-year amortization period and this will determine the amount of debt your church could service. Most church lenders want to see a minimum of 1:1 ratio, while some lenders, who are not accustomed to making church loans will want a 1:2 or 1:3 ratio. This higher DCR makes it more difficult to qualify.

Chuck: how should a church go about selecting a lender?

Start with your local bank where you are currently banking. INTERVIEW them like they will most certainly do you.  Start with: how many church loans does your bank make in a year’s time? Do they have a non-profit lending department or a religious lending division? If they do not, your church will be treated like any other commercial real estate loan and not a faith based ministry.

What’s the difference between a church lender and a bank that makes an occasional church loan? It is the understanding that a church is a non-profit (501-C-3) institution, which doesn’t have a large bottom line – since the church is focused on monies in for ministry and monies out for ministry. A church should have at least three months (at the bare minimum) cash reserve for monthly expenses.

Chuck: Is there ever an occasion, where you would recommend a church to raise the money themselves?

NO. I am reluctant to do so since, in my experience, most churches do not have the personnel to conduct an in-house capital campaign.  I do ask in my initial conversation with the church’s leadership if they intend to hire a professional stewardship consultant who will direct the church in conducting a building campaign. Credit underwriters, will want to know how they intend to pay back the mortgage they want to take out. Secondly, rarely does an in-house campaign raise as much as one led by a professional.

Recently, I spoke to a Business Administrator about the results of their in-house campaign. There was a $4MM dollar gap between what they could borrow/service and cash on hand. His response was, “the stewardship committee had decided not to disturb the wealthy contributing members.” If only he had hired a professional stewardship firm!  I know from my experience working with Impact Stewardship, you all would have given these members an opportunity to bless the church in a non-manipulative and deeply spiritual way.

In fact, I know Impact Stewardship places a lot of emphasis on creative giving education; helping members learn about non-cash contribution giving options that offer the donor tax benefits (such as stocks, real estate, appreciated assets, IRA giving options for seniors, etc.).

When selecting a professional stewardship firm, I stress the importance of the consultant being in step with the senior pastor and executive staff. Don’t hire someone just because they are the least expensive or because someone knows someone who has used them. Check the past and current references you receive from a stewardship firm.

Chuck: Why do you recommend a professional stewardship firm be involved so early in the process?

Lenders do not predicate a loan on future anticipated pledges! Nor do they make bridge loans between what the church can afford and the dollar amount pledged over three years.  This being the case, get the consultant on board sooner rather than later and start the campaign.  Lenders want to see a run record on how much is coming in on a four to six-month time span.

Here is a typical industry standard calculation to compare to actual pledges coming in:

Most lenders predict a dollar amount based on an 80% fulfillment of pledges. This is why you want to hire a stewardship consultant or firm with a higher pledge fulfillment rate. Additionally, a firm who can assist you in determining giving amounts and attitudes before launching a capital campaign is vitally important. Now, take 80% or more in dollars raised in pledge fulfillment and divide that amount by length of remaining campaign say 36 months. This dollar figure is what should be coming in during that 4 to 6 month run record.

$4MM / 80% = $3.2MM / 36 months = $88K per month.  This is what should be coming in monthly during that 4 to 6 month period.

At the end of the 4 to 6 months run another cash available for debt service calculation analysis based on a trailing twelve-month financial period. This should allow the church to borrow more than before since DCR would be greater and the lender’s 110% DCR would be achievable.

Lenders like to hear there will most likely be a follow up campaign. The first campaign sets the high-water mark on borrowing. After the initial three-year campaign is concluded will the church be able to meet the lender’s DCR coverage? A subsequent capital campaign ensures the lender that the church is committed to making their payments and reducing debt until the church’s membership grows into their new facility.

Chuck: Thanks for your time today, Dennis! This has certainly been insightful. I hope this has been helpful to all of you, as well. If you are beginning to think you may need to talk to a Church lender please contact Dennis Moses at 800-583-8890 or contact Impact Stewardship at 615-457-3008 or email

Chuck Klein

Chuck is the principle owner and President of Impact Stewardship Resources, Inc. since 2009. He previously held the position of Vice President of Administration from 2000 to 2009. Having been involved in over 300 campaigns since entering the capital stewardship consulting field, he also has an extensive background in Christian marketing (retail and music). Chuck entered church consulting with the purpose of creating innovative programs that communicate biblical principles, promote church vision and build God’s Kingdom.

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