Answers to Church Funding Questions

Answers to Church Funding Questions

Financing your church building project can be a challenge on many levels. In addition to learning all the finance terminology, church leaders need to consider how the realities of the construction market will impact their church funding. In a recent, free i3 webinar, we talked about the realities of financing a church building project in today’s economy. At the end of our presentation, there were some excellent questions about the material we covered. We thought those questions and our responses would be worth sharing here.

What’s the current rate of inflation, and how does that affect church building costs?

We track reports that show annual construction inflation for 2017 was between 4.25% and 4.75% and very recent data reports indicate a 2.91% cost increase through just the first two quarters in 2018. The specifics depend on your location. Here in central Ohio, the construction market remains very active and this translates to increased labor costs especially where there are not enough skilled laborers to fill available job slots. In other areas of Ohio, and of the country where construction is not booming as much, labor costs are increasing at a lower rate.

Another issue that will impact construction inflation is rising costs for materials. Last year, we talked about how costs for basic construction materials, such as gypsum and lumber, were on the rise. Recent news about tariffs on steel has already led to an increase in prices. Red iron steel went up 7% in March alone, while metal stud and sheet metal prices have risen a few percentage points each month this year. All signs say inflation is likely to continue to rise, and to affect church funding, budgeting and building costs.

Is church funding through bond sales a good idea?

During the 1980s, when interest rates were in the double digits, many churches funded building projects using church bond programs. In essence, it was a way to self-fund a church building through the sale of bonds that have a lower rate of interest than lending institutions were willing to give. Today we have the opposite problem, because lending interest rates are relatively low, so selling bonds would require offering them at higher rates of interest.

Another challenge is that a church selling bonds can confuse people. Because the typical church funding package includes donations, pledges and institutional loans, church members can be confused about why church leaders are also trying to sell them bonds. For these reasons, we discourage the idea of bond programs under current circumstances.

What tips do you have for successful fundraising campaigns?

We believe the primary key to a successful church funding campaign is always good leadership. There are two levels to this. We’ve recently shared our thoughts about the value of engaging a professional consultant for your fundraising campaign. However, that consultant isn’t being paid to do all the work. Instead, he or she will empower and train volunteers in the church community to undertake the fundraising campaign.

Within the church community itself, you also need good leadership to fulfill that campaign as it’s being directed by the consultant. A good “internal” fundraising leader is someone in your church who is organized, gets along well with people, and understands what’s happening with your church building project. With an enthusiastic leader, your church funding campaign is much more likely to find success.

Do you have more church funding questions? Reach out with your queries at request@mcknightgroup.com. We also encourage you to sign up for our free i3 webinars, where we might answer more of your church building questions.

2018-07-10T16:01:52+00:00 July 10th, 2018|Advice, Church Building, Financing|