BP 11122023 129pm - Flipbook - Page 57
Capital Project Financing 3 Guidelines
May 2021
Capital expenditures for land, buildings, equipment, and renovations are required for the health
and growth of the parishes and schools of the Archdiocese. In the best case, a parish or school
raises the funds required to complete a project prior to construction. In other cases, not all the
funds required have been raised prior to construction and a loan is needed.
The loan approval process evaluates whether a parish or school will be able to repay the loan
without jeopardizing its other obligations, mission, and ministry. In evaluating the ability of a
parish or school to repay a loan, we consider the sources of funds pledged for loan repayment.
Generally, the two sources of funds used for loan repayment are generated from:
1. Capital Campaigns, and
2. Annual Cash Flow 3 offertory/tuition is greater than expenses
Loans Based on Capital Campaigns:
Parishes and schools can qualify for a loan based on funds anticipated from a Capital Campaign.
The unpaid pledges act as the collateral for the loan. For instance, if a parish has a Capital
Campaign which has unpaid pledges of $1,000,000, then it can request a loan of roughly
$900,000. We discount the unpaid pledges based on overall history and sometimes specific
history of pledge fulfillment.
Loans Based on Annual Cash Flow:
Parishes and schools that have positive annual operating cash flow can use those funds as
collateral for a loan. For instance, if a parish has a history of, and is projected to have, positive
cash flow of $100,000 per year for the next 5 years, then having a $500,000 loan approved is
reasonable. However, a parish that has a history of operating without a surplus would not be a
candidate for a loan based on future cash flows from operations.
Loans based on cash flow will require the parish or school to demonstrate that reserve accounts
will be maintained at appropriate levels and that debt service is not competing with the parish’s
or school’s mission and ministry.
Term of Loans: The term of the loan should be short as to not interfere with the financial needs
of the parish or school in the future.
The term of a loan based on a Capital Campaign should coincide with the length of the Capital
Campaign, generally 3 years.
The term of a loan based on annual cash flow should be 5 year or less but may stretch as long as
10 years.
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