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Debt Management Advice for Pastors

“Should we burn the mortgage note before we start raising money for future projects?” That was a question one of my pastors asked me last week in a Zoom call about planning for their future.

Let me state right up front: one of my goals is to get churches out of debt and help them stay out of debt. At the same time, I believe that a manageable debt can be what your church needs to keep your vision on track. So, this edition of the Coach is entitled Debt Management Advice for Pastors.

The question the pastor asked me led me to ask these follow-up questions. I asked how much the church owed, and the answer was $1.3 million. Their annual giving is $2 million, and their current cash flow is good. Here is the key question I asked: what is the rate you are paying on the current loan? The answer was 3.5%. Today, acquiring that same loan might cost them a rate that is double what they are currently paying. My answer based on this information was to not pay this loan off. And I recommended a separate loan for whatever other capital projects they were planning.

Why did I recommend that? One major reason is that today, interest rates are higher than they have been in over twenty years. Also, building material costs have skyrocketed, sending the cost of facilities upward as well, making any major capital expense almost impossible to achieve without some type of financing. So, let’s deal with this issue right up front.

Is debt unbiblical? In some circles, this is a raging debate. I have seen churches split over this issue. Let me be clear: I will never advise anyone to do anything that I feel violates Scripture. My view is that the Bible warns against the danger of debt as much as it does the danger of money. Those warnings need to be understood as exactly that.

Years ago, when Dr. Don Sweeting, the President of Colorado Christian University, was a pastor, I helped his church raise capital funds. Dr. Sweeting wrote this about debt. He said,

“Some Christians think that believers should never borrow money to go into debt. They hold this conviction with regard to their car, their house, their business, and their church. Other Christians operate no differently than the world, and they irresponsibly borrow up to their eyeballs. They borrow for things they should have paid cash for, like clothes, vacations, stereos, etc. They are haunted by it for a long time.

We believe there is a wise middle ground that is biblically responsible, where debt is sometimes taken on and used as a tool with the intent to pay it back as soon as possible. That is the action we took this past summer.

It is interesting that the Bible verses most often used regarding debt are Romans 13.7, 8. The NIV renders it, “give everyone what you owe him” and “let no debt remain outstanding.” The only debt that is to remain outstanding is the continuing debt to love one another. Paul is not making a statement that it is wrong to borrow, but saying that when you borrow, pay it back!”

So, in answer to the question is debt unbiblical, I believe the answer is it depends! It depends upon whether the debt is manageable. Does the debt debilitate the church so much that missions and other vital ministries are cut or curtailed? If not, then I believe debt can sometimes be good stewardship of God’s money.

Is debt practical? Again, the answer is it depends. For a growing church needing to build or buy additional space, it is nearly impossible to do that without some type of financing, even if only for a short period of time. It sounds good to build debt-free, but few churches, if any, can accomplish this, as raising the needed funds takes years. If the cost of your project today is $5 million, and it takes you six years to raise that amount, in six years, that $5 million number could be double that. Plus, you have missed six years of potential growth and potential giving. This is why I believe in what I call the Stewardship of Debt. It’s about using man’s money to achieve God’s purpose. However, I still want you to eliminate any debt you have as quickly as possible.

The Rule of Thumb on Debt Reduction

While it is difficult to give set-in-stone advice since every church’s situation is different, I do have some basic rules of thumb as I counsel clients on debt reduction. These three broad rules can guide you if all you are raising funds for is your loan payoff and nothing else. If the debt load is…

  1. Less than 20% of your annual operating budget, then pay it all out with a line item in the budget.
  2. More than 20% but less than 50% of your annual operating budget, then put it as a line item in the budget AND run a small campaign to address the debt.
  3. Greater than 50% of your operating budget, consider a full three-year campaign to wipe the debt load out completely. This has been my typical rule of thumb for reducing debt. But given the current rate of interest, let me add one more rule of thumb.
  4. If your interest rate is significantly lower than the current rate for loans, it might make better financial sense to delay paying off the loan. This is why I counseled against paying off a loan with a 3.5% rate.

My advice for the last few years has been to build what you need for the next twenty years and pay it off ASAP. My goal for you is to establish financial security by 2030, as most of your current top givers will be in retirement by then. Let me give you one final reason why you should pay off your debt quickly.

“We are not allowed to loan money to a church whose pastors have come out against homosexual marriages.” That comment was made to me in 2015 by a banking executive of one of the largest church lenders in the marketplace. Today, corporations are doing what governments can’t do, deciding who is in and who is out. They are using societal issues to attempt to shape and influence society as they see fit. To help them, they have come up with a formula to evaluate your compliance. It’s called ESG. ESG is an acronym that refers to a set of environmental, social, and governance standards that socially conscious investors use to select investments. Based on how your church responds to and stands for or against various issues, you would be given an ESG score. That score can be used by banks and other institutions in deciding whether they want to do business with your church or not. I predict that ESG scores will be used to force the termination of many church loans and the refusal of any future loans. So, can I say one more time,

Now is the time to build, renovate, repair, etc., what you need for the next generation of ministry and to pay off any debt quickly. It’s time to get your house in order, and one key area is debt management.


Mark Brooks – The Stewardship Coach
mark@acts17generosity.com

Missions and Ministry Moment (aka Offering Talk) – This week’s talk can be accessed after you register at: http://acts17generosity.com/simple-file-list/Offering-Talks/2023-53-Talks-for-53-Sundays/November-12th-How-Many-Turkeys-Does-It-Take.pdf

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