How Churches Should Prepare Financially Before a Major Building Project

If you have a major church building project coming up, it’s easy to get stuck in a “how do we pay for this?” mindset. That’s important, but the real emphasis should be on the project as a ministry capacity decision.

Instead of asking budget-only questions, try reframing things this way:

What is a healthy financial strategy for this project that will expand ministry capacity without making the facility the focus?

This still covers the budget, but it includes so much more. It means you’re not purely thinking in terms of fundraising, loans, and debt.

You’re also considering things like financial clarity around the move, maintaining margin, utility of the new space, and how the upcoming project fits into your overall strategy as a church.

Here are some suggestions for how you can financially prepare your leadership team before tackling a major building project to make sure you’re aligning your new project with your existing mission, not the other way around.

Eliminate the Guesswork By Answering the Right Questions Early

Margin is a major factor with any ministry initiative. At Ministry Solutions Group, one of our mantras is that without margin, there is no mission.

When it comes to church construction planning, that means starting by covering the essentials. Before you announce a project publicly, look at the financials to see what you’re really capable of handling as a ministry right now.

We’re talking things like:

• Multi-year giving trends
• Attendance and engagement numbers
• Operating costs
• Cash reserves
• Existing debt (and realistic capacity for more)
• Deferred maintenance
• Capital fundraising capabilities

Starting this research early puts you in the driver's seat. It gives you a clear picture that helps you make informed decisions at every step. It also helps you guard against creating a financial situation that keeps you reacting for years.

This doesn’t mean you’re choosing the numbers over trusting your mission. Stewardship and vision aren’t mutually exclusive. On the contrary, the last thing you want to do is make a bold decision in ignorance that pushes God to do things your specific way.

We’ve worked with churches that had less than half a million dollars in the bank but were trying to build structures over $10 million. That’s how a church capital budget breaks.

It’s more common than you think, too. Often, the churches we work with have a $10 million vision, even though they have a $7 million need …and a $5 million budget.

Take the time to create clarity before you start. Establish a clear project budget that accounts for construction, land or acquisition costs, architectural design, engineering, permits, furnishings, technology, contingencies, the works. You even want to account for fundraising expenses and financing costs.

The more of your church financial planning you know early, the more effective your project will be when it gets moving.

Think Bigger Than Sunday …and Stop Over-Worrying About Compromising Your Nonprofit Status

Don’t cubbyhole your plans to Sunday morning activities. No matter what you’re adding to your facilities, you always want to think of all of the potential ways you can activate your new spaces.

While you want your church spaces to be prioritized for ministry purposes, too many times those same areas remain vacant from Monday through Saturday. Building activation turns those spaces into child care facilities, public pickleball courts, coffee shops, and community centers.

When that happens, they can also generate revenue that offsets their cost. And before you object, creating income with your church building doesn’t mean you’re going to lose your nonprofit status.

Churches can rent spaces out and pursue income-producing activities. If these support your tax-exempt purpose, that’s an easy win. But even if it isn’t, you won’t lose your exemption. The income simply falls under UBIT (unrelated business income tax).

The IRS says certain income might not fall under your tax-exempt status. It explicitly states: “For most organizations, unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization's exemption.”

In those cases, if it’s enough money, you simply pay taxes on it. And the money that’s left? It can help support your facility and your later ministry.

This is why the wise response isn’t to avoid revenue. Instead, structure opportunities thoughtfully and review them with a qualified church CPA or attorney before launch.

Working with an experienced owner’s rep like Ministry Solutions Group is a good idea, too. We’ve helped hundreds of churches navigate activating their spaces so they financially support their ministries during the week.

Protect the Purpose of Every Build

Every time you break ground on a new project, you should have a clear answer to the question of how it is going to support your ministry — and a big part of that answer should revolve around finances. If a building project strangles your cash flow or flexibility as a ministry, it can get in the way of ministry opportunities.

If you’re preparing for a new build and you’re unsure how to prepare financially, reach out to Ministry Solutions Group for a Free Analysis. In the no-cost review, we’ll look at your financials, giving trends, and attendance data with the goal of helping you create a Clear Path Forward as you embark on the next big step for your ministry.