Manage Debt Wisely
It’s natural for congregations to borrow money to expand or update their facilities. What is problematic is when the debt level is too high relative to assets and operating expenses.
Congregations need to understand the benefits that debt may offer, while recognizing the risks and costs. Consider the tradeoffs between fixed- and variable-rate loans, overall debt levels, and monthly payment size relative to other income and expenses. Congregations may want to maintain a line of credit to make it through anticipated and temporary lean periods. Periodic capital campaigns can be organized to lower principal balances to more manageable levels.
Annual practices around debt would be assessing levels of borrowing, interest-rate forecasts, upcoming changes in loan terms, and overall financial trends in the congregation. Such a review might surface opportunities to lower payments or minimize risk. Contingency planning around debt and overall financial conditions could help to prepare for the unexpected.