THE ECONOMY’S DOWNTURN HAS been the subject of concern for homeowners, consumers and presidential hopefuls. Are we headed into a huge recession? How will it affect your church? Already, many church leaders aren’t willing to take out loans.

“Church demand is down, and I believe it is due to the economy,” says J. Lyndon Johnson, president of Johnson Mortgage Services in Cincinnati. Interest rates on loans are good – around 6 percent, he says. But decent rates aren’t enough. “With the uncertainty of what the church cash flow will be, many churches are holding off construction.”

When you’re faced with the need to begin a capital campaign – whether it’s for a new building, renovations or simply to pay off old debt – one of your major concerns is whether your members will respond well and be willing to give beyond their regular contributions. Your members are consumers, and if consumers are worried about a recession, they’ll be less likely to give.

But church costs, as leaders know, arise with no regard to the state of the economy. Projects need funding, money is required and capital campaigns begin. Some leaders believe that hiring a consultant is a good idea; others prefer to remain self-sufficient. Some pastors and church business administrators plan for long-term debt; others borrow only what their church can pay off in a few years. The important thing is to learn to circumvent financial struggles.

One major financial question churches face is whether to incur long-term debt for a project or build only what can be paid for in the typical three years of a capital campaign.

“Our church has, in its almost 50- year existence, always built what it could pay for from a campaign,” says Wayne Bollenbacher, director of finance, budget and human resources for Crossings Community Church in Oklahoma City. “Hence, we’ve avoided long-term debt, which has benefited the church dramatically in its ability to offer ministry and have a staff to provide maximum ministry effort.”

If you want to emphasize the fundraising, rather than long-term debt, hiring a financial consultant can be a good idea.

Some churches may find a consulting firm unnecessary, but Dan Smith, executive pastor of Tri County Church in DuBois, Pa., says it’s great for young churches.

“A consultant is a good idea if you don’t have any experience running a campaign,” he says. “Because we have learned so much from consultants during our last two campaigns, we would strongly consider running the next campaign on our own.”

Of course, there are things to consider before conducting a campaign internally, says Jim Shepphard, president of Atlanta-based consulting firm Generis. The most important issues, he asserts, are experience, accountability and availability.

“For a church to do a campaign effort internally, typically there is no one on the church staff who has the margin in their schedule to provide overall strategic design and implementations,” he explains. “For a staff member to take on this role, there would have to be a realignment of responsibilities for the duration of the capital funds effort.” Though there are important issues that need to be addressed, it is possible for churches to not only conduct their own drives, but to do so successfully.

“We do our own in-house capital campaigns,” says Karen Kelly, director of campus development at Saddleback Church in Lake Forest, Calif. Today, Saddleback members worship in a 35,000-square-foot, 3,000-seat concrete building that cost $7.5 million to build. This and their other facilities accommodate 20,000 attendees every weekend, and counting.

Whether or not a church hires a consultant during the campaign, there are certain challenges that all pastors and other church leaders will face. “People are so busy, and have so much communication coming into their lives, it is hard for the church to distinguish itself and get their attention,” Shepphard says. “It requires what I call ‘consistent redundancy’; you have to tell them several different times, in several different ways, in several different forums.”

Even when this effort is put forth by the church, it will inevitably garner some negative responses, however. “Often, core people who have gotten the message will complain that the church is talking too much about the effort – or sending too much mail or e-mail, whatever the case may be,” Shepphard shares. “What these people fail to take into account is that there are a lot of folks in the church that haven’t even figured out the church is having a campaign. It is at this point that churches are tempted to flinch and cut back on their communication – a mistake, in our view.”

Another challenge, he says, is urging your staff, your congregants and even yourself to be comfortable talking about money. “For whatever reason (usually an improper biblical perspective or a bad experience in another church), it can be difficult to talk about money in church,” Shepphard says. “It is particularly difficult in situations where the church does not engage in regular teaching about the relationship between faith and money.”

If done correctly, however, capital campaigns can bring success without leaving a bitter taste in the mouths of members.

“We feel [capital campaigns] should be related to the spiritual maturity of the person,” says Kelly, “so we try to emphasize that aspect of the Christian life as the motivation for giving.”

While a capital campaign is usually the primary means of funding, it is important to make sure you evaluate all of your options, Shepphard advises. If you’re interested in emphasizing the borrowing aspect of fundraising, the first question you’ll probably start with is, “How much can we borrow?”

“Typically, not much more than three times the annual revenue – and then, only if all expenses, including debt service, are covered,” answers Bob Bernard, vice president of lending and ministry development for America’s Christian Credit Union (ACCU), based in Glendora, Calif.

Bernard advises churches to avoid employing a broker to find a lender, as brokers typically charge two to three percentage points. “Skip the middle man,” he says. “A ministry can deal directly with a reputable Christian credit union like ACCU without fear.”

If your church is looking to finance a major construction project, borrow the entire cost, if possible, and then hold a capital campaign to pay it back. That way, says Bernard, the project can be underway and visible at the time church leaders are asking their congregants to support it.

Churches are often curious about the “if possible” question – the question of the maximum loan amount. “The church will have to maintain a 1.1-to-1.4 debt-service coverage, and they will not be able to borrow more than 70 to 80 percent of the property value,” Johnson explains. “This means they will have to put 20 to 30 percent equity or cash into such.”

Many in the field of church construction are all-too familiar with the statement, “Build it and they will come.” But consultants and lenders – as well as many experienced pastors – will tell you that this is not a prudent way of approaching a costly project. Unfortunately, it’s a relatively common approach.

“There is extra caution built into financing of churches by lenders for many reasons,” Johnson says. “The cash flow is not guaranteed, the church management lacks professional business expertise, much is done by faith and not common sense, most is done without counting the cost.”

Since pastors who come out of seminaries are taught how to grow the church spiritually, he explains, they often are lacking in business training. And if their financial house is not in order, lenders know right away that such a loan is a risk.

“I have always said, since I’m an accountant, that I want to write a syllabus on church accounting to help churches before I die, for it is one of the most important things needed out there for churches today,” Johnson says. “Poor management and no training is the reason churches get themselves into financial difficulty.”

Johnson is not alone in his perspective. Many churches maintain poor financial records, reveals Bernard, who suggests that churches can actually learn something from well-run businesses.

“Churches, like successful businesses, could benefit by having accountant-prepared financial statements, and also put some work into preparing and analyzing an annual budget. Larger churches should have CPA-reviewed or -audited statements,” Bernard insists. “Why should God’s work not be handled with a high degree of responsibility?”