4. Debt

A. Authorization for Debt

Only the Congregation approves any new debt (other than credit cards as described above). The Board authorizes any refinancing of the debt.

B. Current debt carried by the congregation.  

I. Notes (formerly known as Bonds)

In lieu of a traditional mortgage, long-term notes may be issued and sold to church members and friends. Notes are financed at a market-driven interest rate and amortized over 20 years.  They pay interest semi-annually, with a balloon payment at the end of a fixed term – usually five years. When the notes retire new sets are sold to replace any remaining principal.

The finance team will plan for replacement of notes the year before the balloon payment is due, including calculation of the appropriate amortization schedules.  The church administrator will file details of all Notes issued and ensure the scheduled payments are timely made.

Notes issued to members are not carried individually in QuickBooks. Instead, the total issued amount is listed under account #21000 – long term notes payable.  Payments (interest and principal) are posted to account #61020 – debt service. At year-end, the total principal paid is deducted from account #21000 via a general journal entry and written off against account #3200 – perm. restricted net assets (bldg).

Updated on September 12, 2018

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