Another thing lenders look at when evaluating whether or not to make a church loan is the ratio of debt to total income.
This calculation looks at the total long-term debt, or the loan that is being considered, and compares that to the total revenue. This would include contributions and the various program revenue items. If there is a school, the tuition income would probably be included.
I have a post up at my other blog, Outrun Change, on a leader who is in denial of the radical changes slamming his employer. See Radical changes in the work world are painful. Don’t laugh too hard at people who don’t understand what is happening. (New blog name and link listed after I moved the blog.)
Why am I starting a new blog, Outrun Change? You can find it at www.outrunchange.com. (Update – the blog name and address have been changed from what was set up at first. Sorry for the confusion.)
The amount of change taking place today is staggering. The rate of change is going to increase. That change is making our knowledge and skills obsolete. To keep up, we need to be learning and stretching to keep ahead of the radical change taking place around us.
At the Christian Leadership Conference in April 2011, Dr. Richard Swenson said that there will be 1,000 times more change in the next century than in the 20th century. There was more change in the 20th century than the previous 5,000 years. That is staggering.
My focus in the new blog will be on: (more…)
Social media will likely change the power dynamics in the work realm. Social media are widely credited for fueling the ”Arab Spring” that has swept dictators out of power and Tunisia, Egypt, and Libya.
We will see dramatic changes in the corporate world driven by employees and customers. (more…)
The ethical attitudes and values of senior leadership will set the ethical atmosphere for an entire organization. This is called “tone at the top.”
This is something an auditor considers on every audit.
If you would like a short explanation of this idea, along with suggestions on what senior leadership can do to create a good environment, check out Tone at the Top, a post by Sharlynn Garza at the Nonprofit/Government GPS blog.
In my years of auditing, it has long been obvious that organizations have a corporate personality. (more…)
[youtube=http://www.youtube.com/watch?v=HIUaa1P5fTY&feature=player_embedded]
link: http://www.youtube.com/watch?v=HIUaa1P5fTY&feature=player_embedded
Elders, which are you on? Does your pastor know that you can tell the difference?
Dear beloved Pastors, which are you captain of?
Hat tip: CyberBrethern-A Lutheran Blog
While out for a walk yesterday morning, I noticed construction at the strip shopping center near my home. Wood frame in just about done.
New construction? In this economy? That isn’t supposed to be happening, right?
I looked around the strip center. I counted 11 out of 26 small shops that are empty. The two large spaces and one medium-sized space are filled. That is a rather high percentage of vacant space. Yet this piece of new construction is large enough for three small shops.
Someone is optimistic enough about the economy to put their money on the line. Hmm.
When considering whether to make a loan to a church, a lender will likely look at the loan to value ratio. Introduced this discussion here.
In one sentence, LTV is the ratio of the balance of the loan in relation to the appraised value of the real estate that will be securing the loan.
Purpose of this ratio is to evaluate how secured the lender is in the event the loan has to be foreclosed. If the lender takes back the property, will they be able to sell it and recover their loan balance in full after paying commission and closing costs along with past due interest.
Typically, the expected ratio is 70% or less. Go over that ratio and the lender probably won’t make the loan.
I have started a series of posts about ratios used by lenders when considering a church loan. Here are the financial statements I made up to illustrate the series.
A loan officer would extract data from these financial statements to evaluate whether the church is healthy enough to afford the loan. The overall health of this fictitious example is probably slightly better than the typical church today, but that is just my guess.
Example Community Church – financial statements
Statement of financial position (a.k.a. balance sheet) (more…)
Corey Pfaffe, CPA addresses this question at his blog post, Expenses for Wife Attending Conference with Minster:
Is it allowable for a minister to use funds from his professional expense reimbursement plan to pay for the registration of his wife at a Christian conference?
Can the minister and his wife be classified as a “ministry team” and therefore allow such an expense?
Check out his answer and come back for my comments.
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Back already? Good.
Where will the loan officer get the numbers for calculating those ratios when deciding whether to give your church a loan?
That’s where those financial statements from your CPA come into play. The loan officer will go to those financial statements for last year and pull out the numbers.
This is where the question of having an audit or review comes into the discussion. (more…)
Corey Pfaffe, CPA, has a good overview of the employee versus independent contractor issue for local churches. See his post: Church Employee or Independent Contractor.
Professor Pfaffe’s approach at his blog uses a Q&A format.
Notice the question he provides:
My question concerns a church’s categorizing of church employees as independent contractors to avoid paying taxes and workers compensation insurance. Can you shed some light on this?
See something wrong with this picture? (more…)
Want to see a video comparing how many hours of labor needed to buy things from the 1975 Sears catalogue compared to today?
Check out this post by Cafe Hayek, Greatly Stagnating?, for a link to video prepared by Fred Dent.
My little bitty contribution to the discussion of how much technology 90 gallons of gasoline will buy when I was in college versus now, is located here. (Hint: basic calculator then and bottom of the line laptop computer today.)
A loan officer from your bank or credit union looks carefully at your financial statements when deciding whether to give your church a loan for construction or to refinance your existing loan. A variety of numbers will be pulled from the financial statements and compared to other numbers. What does the loan officer look at?
I will discuss this in a series of posts. I’ll describe the ratios, how they are calculated, and give an illustration.
(Cross post from my other blog, Attestation Update.)
Previous post gave ideas for a very brief policy on using social media. Here’s my suggestions for a one sentence policy.
Good for use in any type of organization. In one, two, or four words, your choice. 
(more…)