“Shark Tank” and Church Financing

| October 10, 2014

finances_church_non-profitShark Tank, a show about billionaire investors who either turn away or fight over investing in hopeful entrepreneurs, can teach us a lot about capital campaigns, and how capital campaigns impact a church’s ability to qualify for financing. If you have watched the show, you have probably noticed that there are two types of entrepreneurs, and that those two types of entrepreneurs have very different experiences in the tank.

The first type is the most comical- a person or a group has come into the Shark Tank with a concept to solve one of the world’s major problems (such as teaching a cat to use the toilet), but has no sales to prove the concept. As soon as they can’t answer the “what are your sales?” question, you cringe in anticipation of the embarrassing thrashing they receive as they are run out of the room with their tail between their legs. The second, however, are the inspiring stories- the business owners have come into the Shark Tank, not to fund an idea or a concept, but because they have sales and a significant amount of purchase orders, and don’t have the infrastructure to fill those purchase orders. Typically in this case, the ‘Sharks’ are fighting each other to write checks to their new potential partners.

So what does this have to do with capital campaigns and church financing? Believe it or not, banks look at church financing in a very similar way. Church lending is the anomaly of the banking world. While most businesses center around financial reporting, and are in business to make and keep a profit, churches tend to neglect financial reporting, and try to give away as much of the money that comes in. So, when a church, which typically lacks for Cash on Hand and operates on the slimmest of margins, is trying to go into a construction project, the capital campaign is one of the only things that a bank can look at, understand, and underwrite. Anyone who lends money wants to know how and when they are going to get their money back, and the capital campaign is the best way for a bank to do that.

Let me give you an example. Let’s take a church with a $2M annual budget, and $300,000 Cash on Hand, looking to do a building project of $5M. The bank is typically going to require that they have 20-30% equity in the project, which means that this church, despite being able to cash flow the debt, can only qualify for a $1M-$1.5M total project. But, if there is a professionally led capital campaign, the bank will look at the capital campaign like the Shark Tank investors look at purchase orders-“you don’t have it yet, but you will”. Once a capital campaign has been put in place, and the commitment cards have been collected, the bank will typically use anywhere from 75-85% percent of the pledged amount, as long as 10-20% of the pledges have been collected, towards qualifying the church for the project.

Let’s take this same church with a $2M annual budget, but let’s include a professionally led campaign of 1.5X annual budget ($3M). As mentioned, the bank will use, at the low end, 75% of the pledged amount, which is $2.25M. If the church is required to have 30% equity into the project ($1.5M), then you have not only exceeded the $1.5M necessary to qualify for a $5M project, but according to the bank’s credit analyst, you’ve also already paid off another $750k before the project even starts, without changing the Balance Sheet a bit.


In summary, a professionally led capital campaign is as important to the bank as purchase orders and sales are to Mark Cuban. If a church is going to move forward with a project, there is absolutely no question that a professionally led campaign can swing the total project value by millions of dollars.

Category: Finances

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Email| Website | Nathan Artt is the President of Ministry Solutions, which provides financial consulting and project leadership through construction planning, financing, and debt restructuring. He has extensive corporate experience in the banking industry, including positions of National Marketing Director and Vice-President of Corporate Development in large lending institutions.