At the Facility Planning seminar every spring, we help churches discover their path forward for their community. Whether they’re putting on a new worship center addition, re-imagining their existing space, or starting from scratch with a whole new facility, each member of our Facility Planning team is equipped to help churches and religious communities navigate the troublesome, yet rewarding, process of a building project. 

After decades of helping churches and religious organizations with one of their most significant financial undertakings — facility expansion/renovation — we've been able to observe some different patterns that arise within communities. We’d like to explore a couple of them.

Spending Valuable Resources on the Design of a Building You Can’t Afford 

Most ministries start with a qualified design consultant/architect that can help them creatively walk through facility needs and a ministry’s wish list. The best of these design specialists work collaboratively with skill-specific specialists who focus on any number of unique needs. 

One such specialist that you should always make sure is engaged early in the design process is a financing specialist. Particularly, you should be sure to work with one that has significant experience in financing religious entities. Understanding what you can afford to build based upon historical financial trends – as well as the impact of a forthcoming generosity initiative (capital campaign) – provides the assurance that you can finish what you’re starting. The right financing specialist can ensure that the facility you’re designing is a project you can actually accomplish! 

Starting Construction Without Having a Fully-Funded Project  

So what is meant by the term “fully-funded project?” This is a project in which the comprehensive budget to complete (design, permitting, all hard & soft costs, AVL, contingency, etc.) has sufficient cash on hand and closed loan proceeds in place – at day one of construction – to complete the project. 

Simply stated: If your comprehensive project budget is $1 million and you only have $500,000 of cash on hand, don’t start construction until you have a closed construction loan in place with the ability to draw up to $500,000 ($500,000 cash on hand + $500,000 closed construction loan = fully-funded project at day one). 

You may be wondering why this is such a big deal. You may have a generosity initiative that’s supposed to bring in the additional $500,000 over the next 2 years. 

Let’s start with the moral/reputation-oriented dynamic. Signing your ministry’s good name/reputation on a construction contract that you do not have the ability to fulfill from day one of construction instantly places the ministry in a compromised position. 

Let’s assume you find a contractor that’s willing to proceed without a fully-funded project (not likely – but it happens), and, for some reason, your generosity initiative fails. You’ve spent your $500,000 of cash on hand, plus an additional $200,000 you’ve raised from the generosity initiative – but – you don’t have the remaining $300,000 to complete the project. What happens now? 

Most contractors will cease construction until you can demonstrate (via cash or closed loan) your ability to complete the project (which they should have done from the outset). Now you have a partially completed building that is unable to be occupied. You must either pause while you raise the additional funds or try to find a lender to come in mid-construction. Both of these are costly undertakings fraught with numerous challenges.

But all is not lost

If, from the outset, you insist upon a collaborative design experience that incorporates an experienced financing expert and a fully-funded project from day-one, you’ve set the course for a successful expansion experience!

If you’re ready to talk about where you’re at in the facility planning process, we can help. Whether you’re just starting to dream a bit or you feel like you should have broken ground six months ago, our team is here to help. Find out more.