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Home > The Building Process > Structuring Debt
Structuring Long-Term Debt
In the best of circumstances, a capital campaign is so successful that a parish or school is able to entirely pay off a construction loan and not have to carry long-term debt. More often though, the capital campaign reduces the construction loan and the remainder of the construction loan is rolled into long-term debt.
Long-term debt payments need to be incorporated into your budget, since they become an ongoing annual expense. The lender also will require certain covenants and reporting requirements that need to be addressed annually or periodically.
Most long-term loans are kept to 20 years or less, if possible. Lenders want to limit loans to no longer than the useful life of the facility. They want to avoid the funding of old debt during a future period when you may want or need to raise money to pay for improvements or a new building.
At CFC, we can help you structure your loan and explore options with the banks. We can solicit proposals for you and assist you in the review of loan documents.
At some point during your period of ongoing debt payments, you may want to consider refinancing. Perhaps you can command a lower interest rate, reducing your monthly debt service costs. Lower monthly payments may free up cash to pay down the loan at a faster rate. See our section on Refinancing Debt for more information.
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