Funding the Local Church: The Debt-free Debate

The Continuing Debate

I recently read the 1996 Moody Press book by Jeff Berg and Jim Burgess, with foreword by Larry Burkett, titled “The Debt-Free Church”. The distinction is made in the text between “debt” as unsatisfied commitments and “borrowing” money from individuals or lending institutions. The comment is made that perhaps the book should have been titled “The Borrowing-Free Church,” placing the emphasis on the ills of ever borrowing money.

The majority of the quotations in the book are from Larry Burkett’s writings or from retired architect Ray Bowman who wrote “When Not to Build”. I disagree with both of these authors on this topic. After nearly 24 years of work as a conservative church development consultant, I do not believe their views on this issue represent an accurate interpretation of Scripture or a wise approach to ministry and facility development.

I agree with Berg and Burgess that there have been many problems and failures in churches related to building program debts. But building a case on atypical extremes and abuses is wrong. Many churches have used borrowed funds wisely and have prospered. Borrowing churches are not necessarily carnal churches. Furthermore, debt-free churches are not necessarily spiritual churches. (There was rich Laodicea, for example.) Many debt-free churches are simply not doing anything at all to reach people for Christ.

I agree that surety for church loans is wrong, interpreted as individual officers and members of the church co-signing the loan, pledging their personal assets as collateral. Instead, the church must develop its corporate ability to borrow funds based on corporate assets and cash flow. Officers of the corporation sign the loan documents obligating the corporation, not themselves with risk of their personal assets. The concepts presented in the book are distortions of the church’s appropriate corporate structure and operation.

I strongly disagree with statements such as these in The Debt-Free Church:

“We believe that borrowing (especially for ministry purposes) is always risky, often wasteful, and almost always unwise—but it is not a sin.”

“But we’re advocating what we believe to be a more biblical approach: that it s unwise and unnecessary for ministries to even borrow money.”

“. . . Debt-free ministry is God’s will for all believers.”

“. . . Borrowing is a worldly approach to ministry.”

Quoting Burkett:

“God wants to perform miracles; we instead substitute mortgages.”

“To follow God’s ministry pattern means no borrowing.”

I strongly agree with the authors that borrowing should not be a substitute for sacrificial giving. Seeking to stretch people through borrowing and an enlarged budget is unsatisfactory.

A Plea to Keep Your Balance

The reality is that very few churches have the funding capacity to build appropriate facilities without an extended time period to pay for the construction. In many cases that is true, even if every member were tithing. But are we to tell each church to wait to move ahead until all members evidence their spiritual maturity in sacrificial financial stewardship?

I suggest these principles to keep your balance:

a. The sacrificial giving of every member should be taught and sought to raise as much money as possible in a reasonable time that will not further hinder the development of the ministry.

b. The smallest amount possible should be borrowed as the last resort, rather than the first course of action. Borrowing should not be a substitute for sacrifice.

c. The shortest term for the loan should be the goal of the church, thus limiting the amount of interest to be paid. But interest costs have to be weighed against loss of ministry, and the inflation of building costs over time.

d. The size loan should be related to the cash flow of the church, allowing half of the cash flow for ministry operations and half of the cash flow for missions and loan amortization. (Unless you maintain a healthy “Jerusalem” ministry,
you cannot always fund worldwide missions.) No more than one third of the cash flow should be used for loan payments.

e. The supported ministry advantages must also be kept in view. While a building will not always make a church grow, facilities are necessary for a growing church. Maintaining healthy ministry minimizes church division over facilities.

Your enlarged facilities can accommodate more people, who can then prepay short-term borrowing, providing you are developing true disciples. I have watched many healthy churches prepay their loans. They have ended with debt-free facilities with less cost (in terms of ministry and facility) than the cost of waiting (when all issues are considered).