We are now two years into the pandemic, and there are many signs of hope emerging in our local churches. Prudent church leaders are using this season to evaluate ministry funding and if this is the right time to address lingering debt issues, needed capital upgrades, and renovations.

Horizons is seeing very positive outcomes in our leader alignment and feasibility studies for both debt and other needed capital improvements. If you have debt or other capital needs, I encourage you to evaluate if now is the right time to address those needs. If your church has debt that is consuming 10% or more of your ministry funding, I encourage a strong sense of urgency in determining if now is the time to act.

Why 2022 May Be the Best Time to Eliminate Debt or Fund Needed Upgrades

In most churches, donors continue to be very supportive of debt elimination efforts, needed renovations, and capital upgrades. Here are just a few of the factors motivating them.

Rising Interest Rates: The Federal Reserve recently announced to expect six interest rate increases in the next 12 months. Most church loan interest rates will adjust within a few years to what is widely expected to be higher rates and, consequently, higher monthly payments. 

Inflation: Higher inflation rates mean it will likely cost more in the future to accomplish what is needed today.

A Desire to See More Ministry Funding: Horizons’ 2021 Giving and Worship Report revealed that 42% of churches reported an increase in giving in 2021 over 2020. These statistics demonstrate that donors in a large percentage of churches see the impact their ministries are making and despite the challenges of the pandemic are stepping up to provide additional ministry funding.

You may be surprised to learn that churches whose annual ministry giving is flat or in decline consistently have very successful capital debt elimination campaigns precisely because doing so provides for more ministry funding. If your church is among the 36% whose giving is declining or the 22% whose giving remains flat, removing debt service from your ministry budget can quickly provide much-needed additional ministry funding. It may also surprise you to learn how often churches struggling to fund ministry can easily raise capital for projects desired by the church.

Critical Facilities Maintenance and Improvement: Many churches have both existing debt and critical capital needs that require immediate attention. Combining debt elimination with facilities improvements is an excellent strategy for broadening the appeal during a capital campaign program. Today, most churches choose to add capital needs to debt elimination efforts, resulting in increased overall giving toward both.

Funding New Ministry Delivery and Engagement Strategies: The pandemic has challenged churches to rethink ministry delivery and engagement. Rather than focusing on in-person worship as the primary measure of vitality, church leaders are rapidly embracing new ways to measure the effectiveness of their disciple-making processes. Almost all growing churches have had to strengthen their technology muscles, including investing in making online and on-demand worship more attractive. This almost always requires additional capital and ministry investment. Others have discovered new and innovative ways to engage members in spiritual formation, community building, and serving their mission fields. This almost always means additional funding both in technology and staffing. Churches servicing debt through operating revenues struggle to free up resources to fund the new ministry opportunities.

If you are wondering if the timing is right for your church, download this free guide: How to Know if Our Church is Ready for a Capital Campaign.

Preparing for the Next Chapter

If you feel the timing might be right for a debt elimination effort, there are a few initial steps you should consider.

Gather the facts on your debt and capital needs: You will need to share detailed information with your congregation regarding how and why the debt was incurred, the terms of your loan agreements, and the financial impact of returning these savings to ministry funding. Many have joined your congregation since you took on the debt while others have simply forgotten the details. Telling the story of why the debt was incurred, the impact the projects have had and the financial details of your loan with your congregation will help to establish the trust and transparency that is essential to success. The same is true for renovation and capital improvements. You will need reliable cost estimates of the upgrades and renovations you want to test in your donor alignment and feasibility study. It is critical that your donors be able to visualize how your ministries will be improved through capital giving. When you share this impact, put a face on it by telling the story of a life that will be changed.

Engage your Ministry and Financial Leaders: Before making any decisions about a debt elimination effort or new capital funding initiatives, gather your ministry and financial leaders and share your vision for the sole purpose of gathering their wisdom and feedback. Whether you meet one-on-one or in a group, in-person, or via Zoom, be sure to outline the specifics of what you hope to accomplish through your campaign. When you invite their feedback, you are also gaining their buy-in and support. Your ministry and financial leaders have already demonstrated their investment in your church. Inviting them into the conversation regarding the church’s future will ensure their continued engagement.

Give these leaders the opportunity to share what excites them about your vision, after the debt is addressed, to ask questions, and provide feedback. For success, they must have a clear understanding and be supportive of your plans once you have liberated crucial ministry dollars. The best way for this to occur is to invite your ministry and financial leaders to begin to dream God-sized dreams with you about your future and the next chapter in the life of your church. Dreaming and praying together will create the ideal environment for discerning God’s plan for your church.

One thing is clear. No matter how much we desire to, we will never go back to “the way we have always done it.” The changes created by the pandemic necessitate the need for experimenting with new and creative ideas.

Building Your Next Chapter Together

Remember that the key motivator for eliminating debt or funding a renovation or campus upgrade for most people is not the debt or the physical changes to your buildings, but the opportunities eliminating debt or improving your ministry space creates. As you prepare to share your plan with the congregation, be sure to clearly articulate how you plan to expand your ministry funding plan once your debt has been paid off or how the upgrades will allow for more effective hospitality, discipleship, or other ministries. Will you hire additional staff to facilitate new ministry initiatives? Do you plan to launch a digital discipleship program? Will you begin a new outreach ministry program or worship service? Do you plan to increase funding for youth and young adult ministry? Whatever your God-sized vision is for your church, be sure to share how you intend to rebuild your ministry budget post debt.

Before proceeding with a capital campaign, it is critical to first test the willingness of your congregation to support your vision. In this webinar from Horizons and CapinCrouse, we discuss the importance of conducting a feasibility study prior to launching a capital campaign. Understanding the readiness of your congregation, and in particular, your ministry and financial leaders will help shape your capital campaign process and timing. A feasibility study will assess how important debt elimination is to your members and how supportive they might be of a capital campaign. You will also be able to inform members and test their levels of support for your post-debt vision. Gathering this critical data prior to launching your capital campaign will enable you to pivot, if needed, and forge ahead if the study determines there is broad support. Conducting a quality feasibility study will ensure your congregation moves forward together in mission and ministry.

Now is the time to consider the opportunities for rebuilding your annual ministry plan without the burden of debt service.

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