Christianity Today, in a revealing study of church borrowing, reported that historically over 84% of churches utilize some form of debt or borrowing for construction or media technology projects and that nearly 70% of churches with annual budgets exceeding $500,000 finance AV technology. The amount of money a church borrows depends on the size of its budget.
Technologies for Worship Magazine’s annual survey of church plans for media technology projects reports that a high number of churches plan to add, upgrade or install new media technology including sound reinforcement, digital display technology, integrated computer and communications systems, broadcast technologies, enhanced security and fire alarm systems and music ministry equipment. At the same time contractors and systems integrators report that churches often “under-budget and over-spend” on their AV, media technology projects. The result is that churches often settle for “less than” optimal systems. One leading church media systems contractor reports that in many cases churches repeat the process of technology integration two or three times before finally “getting it right”. Technology budget failures are costly from a “financial stewardship” standpoint.
Spread the cost of media, sound or AV technology to match the timing of cash flow. Churches, large and small, struggle with the idea that equipment and technology must be paid out of the annual capital budget. In turn the typical capital budgeting process is sometimes an annual quagmire that delays or reduces a project size. One of the primary reasons that churches leverage outside capital (financing) is that it spreads costs over multiple budget periods and across the life of the equipment. Churches find financing to be a creative “business solution” to budget and cash flow needs. They value how it helps stretch the budget and helps fully fund the optimal AV project. By working with a creative lender or qualified financing source a church may discover a unique and creative way to meet budget objectives for its full media project. Sometimes the best solution is mid-term financing from 24 to 84 months. Other times the best solution is a “bridge loan” for 12 months with the ability to pay-off at any time.
Interim financing can support media technology projects that often take weeks and months to fully design, order, deliver, install, test and implement. After the original design consultation, contract administration and order process a recent $2.2M audio and video projection system in a well known California church took nearly 11 months to install and activate. The AV systems installation needed to coordinate with the construction timetable for the facility. The project included eleven months of “interest only” financing leading to a 36 month fixed-rate term financing. Not all projects take this long yet it is not uncommon for projects to unfold over several months especially where construction and facilities are involved.
Churches finance media technology as a means to match costs to the timing of tithing, contributions and donations. There are also other reasons why churches utilize financing as a financial stewardship strategy including:
1) Financing helps the church retain and preserve cash and capital
2) Financing helps preserve bank credit lines for operations, working capital and ministry growth
3) Financing acts a “hedge against inflation” in that the church pays for today’s use (of the technology) with today’s dollars and pays for future use with future dollars.
4) Fixed rate financing allows churches to spread costs over multiple budget periods while creating a predictable monthly payment
5) Financing helps the church to “right-size” the project and lets the technology “pay for itself” through ministry and congregation growth
Small and medium sized churches borrow infrequently. Church leaders may not know what questions to ask of a lender or financing source. Here are a few suggestions: Determine your financial, budget and cash flow objectives then seek a financing solution that accommodates your specific goals. Ask your financing source how experienced they are with lending to church and house of worship facilities. Request recent references. Ask what criteria are used to determine credit approval and the interest rate. What about fees? Is there is a pre-payment penalty for early payoff? Obtain a commitment to a step-by-step process so that you know, in advance, what the procedure is. In most cases you should not have to submit an application fee or monies up front to get approved.
Today’s church media technology projects can be complex and involve almost every key department in the church administration. As such it is critical that churches, big and small, new or well established, take a professional approach to evaluating, planning and implementing church media projects to insure that they fit the scope, objective and timetable respective to the particular ministry. At the same time its important that executives within the church who are charged with leading a major media project take the time to engage the most reputable and knowledgeable professionals available to consult, design, advise and implement a comprehensive media technology strategy. Prudent methodology extends to the analysis of budgeting, planning for and funding media technology projects to insure the best stewardship of church finances and a maximum return on media technology as a powerful tool within the ministry.