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Six Debt Ratios and Measurements Your Church Should Monitor

These calculations offer key clues about the health of the church's finances.

Six Debt Ratios and Measurements Your Church Should Monitor

Why is it important for churches to monitor debt ratios and measurements?

First of all, your lender will monitor them even if you aren’t. Keep in mind that many loan covenants are based on the results of key debt ratios. If you violate one, there may be penalties and, in extreme circumstances, the lender may even call your loan—requiring you to refinance or pay off the remaining balance. Most importantly, you will strain the relationship with your lender.

There are six debt ratios and measurements you can use to monitor your church’s dependence on debt levels and identify any needed adjustments. These represent important indicators every church should understand and monitor.

1. Debt to Unrestricted Contributions

total debt
____________________________
unrestricted contributions

This ratio measures how many times your debt is greater than annual unrestricted gifts. Lenders expect ...

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Posted:
  • February 25, 2015

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