Lenders use a formula called the Debt Coverage Ratio to determine whether a ministry’s debt is reasonable or too high.  The Debt Coverage Ratio compares the borrower’s annual net income (excluding mortgage interest and depreciation) to the annual debt payments as ministerial debt.

Basically, lenders like to see the ministry’s annual net income be anywhere from 10% to 25% more than their annual debt payments.  This means you have enough to cover your debt payments plus you will have an extra 10% to 25% left over for cash reserves and major purchases.  I recommend the ministry’s net income to be at least 25% higher than the annual debt payments.  This gives you a little more room to work with for expanding your ministry and missions outreach programs as well as to fund new furniture, equipment and/or vehicle purchases.