6 minute read
Nonprofit Grant Fundraising & Funding: A Comprehensive Guide
Nonprofit organizations rely heavily on external sources of funding to carry out their missions. Among these sources, grants represent one of the most significant and competitive forms of funding. Grant fundraising is the process by which nonprofits secure funding from the government, private foundations or corporations, typically for specific projects or operational costs.1 Understanding the dynamics of grant funding is essential for any nonprofit seeking sustainability and growth.
The role of grants in nonprofit funding
Grants serve as a vital revenue stream for nonprofits, and there are several different types of grants a nonprofit might receive.(1)
Conditional grants: A conditional grant requires a nonprofit to fulfill certain conditions before it can gain access to the funding. This contrasts with an unconditional grant, where the nonprofit can receive the funding immediately. The condition might include following certain reporting procedures or raising a specific amount of money that the grantmaking organization will then match.
Project or program-specific grants: Project or program-specific grants are tied to a particular initiative, service or research project that aligns with the grantor’s objectives. They often require detailed proposals outlining the expected impact, timeline and evaluation plan. Your nonprofit will also need to maintain transparency and only use the funds for the specific project or program you outlined in your application.
Capital grants: A capital grant provides funding for facility and equipment costs. Governments typically offer these types of grants to help nonprofits improve local infrastructure or living conditions within the community. There are also general operating grants, which are unrestricted funding that nonprofits can use for any purpose, such as rent, utilities, salaries and daily expenses. Though these offer more flexibility for nonprofit operations, funders usually see these as less accountable due to concerns about mismanagement of funds.(2)
Steps to successful grant fundraising
Research and identify potential funders. Begin by identifying funding sources that align with your organization’s mission, goals, programs and future plans. There are tools online, like grants.gov, that provide databases for researching potential funders as well as resources on the different types of grants, who’s eligible and other resources to help you through the process. Targeting grantmakers whose priorities match the nonprofit's work increases the likelihood of success.(1)
Build relationships with funders. Fundraising is relationship-driven, and this is especially true for grant funding. Funders often have the same intention and goals as grantees: making an impact in their communities or on specific issues. It’s common for an initial grant to eventually grow into long-term, multi-year support funding.(3)
Craft a compelling proposal. Before you can receive a grant, someone must submit a grant proposal. This can be a staff member or a third-party grant writer who you hire. Typically, the funding entity will have a list of requirements and/or documents that your nonprofit must meet or submit. A strong grant proposal clearly demonstrates your nonprofit's impact, the community need it addresses and the measurable outcomes of the proposed project (if applicable). Key elements of a grant proposal include:(4)
Executive summary: A concise overview of the proposal and the request.
Organizational background: A summary of your nonprofit’s mission, history and accomplishments demonstrating its capacity to carry out the proposed project.
Statement of need: Evidence that demonstrates why the project is necessary and the issue it addresses.
Objectives and proposed outcomes: Define the goals and state how you will measure whether you’ve achieved them. Provide the specific, measurable outcomes you expect your project activities to produce.
Project description: A detailed plan outlining how your nonprofit will use the grant, including objectives, timelines and methodologies. Who will do what? When and how will they do it?
Evaluation plan: Describe how you’ll assess the impact and success of the objectives, often a critical component for funders.
Budget: Provide a clear, transparent and realistic budget that shows how the grant will be allocated.
Complying with grant requirements. Funders often require specific documentation to accompany proposals, such as a copy of your organization’s 501(c)(3) from the IRS, financial statements, a list of your board of directors, your current operating budget and/or letters of support from partners or stakeholders. These documents should be prepared and up to date.(4)
Grant reporting. Most funders require periodic or final reports to demonstrate how the funds were used and the outcomes achieved. You’ll need to track your progress closely and be prepared to submit detailed reports, as this can influence future funding opportunities with the same or other grantmakers.
The challenges of grant fundraising
There could be any number of challenges your nonprofit faces when it comes to applying for grants. Below are just a few common ones you may experience.
Highly competitive landscape. The number of nonprofit organizations has steadily increased at a rate of 1.4% annually during the past 20 years in the U.S. alone.5 With thousands of nonprofits applying for grants annually, competition is fierce. Many grants have specific eligibility criteria, and only a small percentage of applicants receive funding. This makes it critical for nonprofits to not only meet but exceed the expectations of funders.
Donor fatigue. Many nonprofits need to secure new sources of funding regularly. Relying too heavily on grants for operating expenses can cause donor fatigue. Diversification of revenue streams—through individual donations, events, earned income and other sources—is crucial for long-term stability.
Administrative burden. The process of researching, writing and managing grants can be labor-intensive. Smaller nonprofits, in particular, may struggle with the administrative burden that comes with applying for and reporting on grants. To alleviate this, some organizations hire dedicated grant writers or consultants to streamline the process.
Overcoming these challenges may not be easy, but your organization can take steps to improve your chances of success. With the right people, planning, processes and technology in place, you can improve your reach, boost your donation pool and increase your impact.
Conclusion
Grant fundraising is a crucial element of nonprofit funding, providing essential resources to implement programs and services. However, it requires strategic planning, detailed proposal writing and strong relationships with funders. By understanding the grant landscape, creating compelling proposals and ensuring compliance with grant requirements, nonprofits can secure the necessary funds to achieve their missions while also navigating the challenges of sustainability and competition. To thrive, nonprofits should adopt a holistic approach to fundraising, incorporating grants as part of a diversified revenue strategy.
CONTRIBUTOR: BETH MEIDINGER
Beth has more than 30 years of experience in retail and commercial banking, providing loans and banking solutions for nonprofit organizations and for-profit businesses in the Puget Sound area. Since joining the team in 2015, Beth’s responsibilities involve closely working with her customers to build long term relationships and develop strategies to meet their financial goals.
1 kindful.com/nonprofit-glossary/nonprofit-grant
2 instrumentl.com/blog/how-to-find-general-operating-grants
3 resources.foundant.com/blog/the-importance-of-grants-in-yourfundraising-strategy
4 donorbox.org/nonprofit-blog/grant-proposals
5 netsuite.com/portal/resource/articles/accounting/nonprofit-fundraising-challenges.shtml
