Count the Cost
“It is a great blessing from God to be in a position in which you do not have to borrow. But does that mean the Bible teaches that all borrowing is unwise?” Pastor, teacher, author and respected theologian John Piper argues that it does not.
Most loan projects result in multiple ongoing expenses. Foremost among these expenses is the monthly loan payment. Calculate your estimated loan payment in advance, so you can count this cost and plan accordingly.
Other new expenses could include increased utility costs and increased property/casualty insurance costs, depending on the type of project. To estimate utility cost increases, we recommend accounting for the increase in property square footage as well as an increase in property usage. To estimate property/casualty insurance cost increases, ask your insurance company for a quote.
As you consider the above costs, especially a monthly loan payment, it may be in your ministry’s best interest to pursue short-term capital fundraising. If so, our staff may provide consulting services — including a feasibility study and/or marketing plan. Our consulting ministry specializes in church capital campaigns and has helped several churches meet or exceed their fundraising goals. For more information, click here to learn more about capital campaigns.
Taxable Income
One common misconception about churches and related ministry organizations is that any income they generate is non-taxable. In fact, it is quite common for ministries to generate income that is fully taxable. The IRS is concerned with how your income is generated, regardless of whether or not it is ultimately used for a tax-exempt ministry purpose. Therefore, it is important to look at the source of your income rather than the ultimate use of income to determine if it is tax-exempt.
One of the more common sources of potentially taxable income for ministries is rental income, and we encounter this fairly often when helping churches with funding for capital projects. If your ministry receives income from any source other than charitable contributions, we strongly recommend that you investigate whether or not you may have an unrelated business income tax (UBIT) liability. Consultation with the church’s professional advisors would be wise to discern the extent of liability.