There are probably as many attitudes and philosophies on commercial borrowing as there are churches. At some point the question will be asked; “How much money can our church borrow if we choose to do so?” Although commercial lending is a complex process, three key ratios are fairly universal for the majority of lending institutions. Commercial lenders will also look at the history and stability of your church and its leadership. When considering construction, it is advantageous to establish the amount for which your church will qualify to borrow from a lending institution as early in the process as possible.

The following are the most common limits that commercial lending institutions follow. As you would expect, these limits are going to vary with economic conditions and should only be used as general guidelines.

Loan-To-Value/Cost
Simply put, most institutions will lend up to 75% of the appraised value of the building. Be aware that due to different methods of appraisal, this amount can vary significantly.
Building Value X .75 = Loan Amount

Debt-To-Income
Most commercial lenders will limit the total aggregate debt of the church to 3.5 times annual income. Generally, annual income is defined as General Fund Revenue + Building Fund Revenue. Some institutions will consider other on-going non-designated income (daycare revenue, rental income, etc.) as well.
Annual Income X 3.5 = Maximum Debt

Annual Debt Payment
While some may go slightly higher, as a rule the total annual amount of all debt payments should be no more than 35% of your annual income as calculated above.
General Fund Income X .35 = Maximum Annual Payment

These formulas are intended solely as guidelines to offer a place to start. Since each loan is unique, only your commercial lender can determine the amount for which your church qualifies.