Financial Considerations

Expenses will greatly exceed income for the first 12-18 months of your campaign.

You cannot rely on cash flow from pledges to cover the up-front investment you’ll make in architectural fees and fund-raising expenses.

You will need to put in place either a line of credit or some type of borrowing process to make sure all facets of your campaign move smoothly. We always suggest a maximum credit line of up to $250,000.

You will need to include debt service expenses on outstanding pledges after completion of construction and prior to those pledge payments being received.

The board must determine whether tax deductibility is an option. This information would come through the foundation, so it is the board’s responsibility to contact the foundation to find out about the available programs, and to obtain the paperwork and regulations to determine how these can benefit the project.

If you utilize tax-deductible gifts, these are generally restricted to larger amounts ($100,000 and higher). These are the first gifts to be solicited, so they generally arrive earlier. As a result, even if the donors make payments, you can’t access the money until you do the actual project.

When you calculate your cash flow projections, you cannot assume 100-percent occupancy. You should do enough research on dorm rates and apartment costs so that you know your rates are solidly competitive. You should not necessarily strive to be the cheapest. Also, you can assume a modest level of annual increase over time. (If you are currently below market, you should strive to stair-step the per-man cost up to market level over the next two years; this will improve your cash flow picture and prevent an excessive increase when the residents move into the new house.)

You will have to reach out to your bank for financing the actual construction of the project. The bank will look at your campaign strength, membership, cash flow history, and your financial projections to analyze and determine their commitment.