The debt trap

You may not read of it often in the media, but banks have foreclosed on churches that defaulted on their mortgages. One source says that 270 churches were foreclosed on in 2010 and 138 in 2011.

The problem is there’s too much church debt. And the outcome, says Joe Sangl, president/CEO of INJOY Stewardship Solutions, is slow growth, stunted outreach and reduced vision. In the early part of the new century, churches were growing and they purchased land and built phenomenal facilities to accommodate this growth.

“In many cases this approach consumed every single dollar that the church had available plus a huge financing package – and banks were more than happy to lend,” Sangl says. “The debt trap was set.”

Then came the recession of 2008, and many churches were trapped with too little financial margin, he says. As members experienced layoffs and income reductions, giving declined. Then came staff reductions and ministry budget cutbacks just to keep current with the church’s mortgage.

But Sangl notes that too much church debt can rob a leader of vision. “When a church is operating with little to zero margin, it can become virtually impossible for the leadership to consider visionary activities,” he says. Time and effort is “consumed with determining spending cuts and managing all financial decisions because of deteriorating cash flow,” Sangl says. “It is difficult to dream big when it is a struggle just to keep the
lights on.”

Sangl shares the experiences of two congregations that were growing, yet finding space without great debt. NewSpring Church in Anderson, SC, where Perry Noble pastors, used rented facilities at a local college through its first six years. “Even today most of its eight campuses are using rented facilities, allowing the church to invest more money directly into ministry,” Sangl says.

Element Church in Cheyenne, WY, where Jeff Maness pastors, leased what was a grocery store, which allowed the ministry to grow substantially without incurring a major debt obligation. “Now five years old, Element Church has been able to acquire the entire commercial space with more than a dozen leased spaces, allowing the church to grow without having to absorb the full impact of debt,” Sangl says.

He counsels churches to clearly define the realities of their current situations. Understand the debt payment structure, required payment dates and potential interest rate changes. “A projected monthly cash flow plan looking forward to the next 12 months can be an extremely helpful tool in truly defining reality,” Sangl says.

He also advises a church to look at the income and outgo of the budget, with a written plan, action items, defined responsibilities and timing. Sangl suggests teaching stewardship and generosity, and online and digital giving will provide much needed giving consistency.

Scarcity is a major driver of innovation, he says. “While struggling with debt is certainly something all leaders would rather do without, it can unite a ministry team like few other challenges can and foster tremendous innovation,” Sangl says.

Debt retirement campaigns may not be sexy, but they do push money to ministry and not to the bank. “People will give generously, cheerfully, obediently, and even sacrificially when they clearly understand that ‘less debt equals more ministry,’” his experience shows. Saving a million dollars in interest payments over 20 years that could have gone into ministry is a huge incentive.

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