Nonprofit Fact

There are many challenges in starting a new or trying to grow a small nonprofit with no staff and no cash flow. The most difficult challenge is raising money to support the overall organization including daily operations and programs or services.   

Many nonprofits think they can win grants of $250,000 to $1.0 million in start-up funds when they have $50,000 or less in annual income. 

Grantmakers will not invest in an organization that does not have income streams above the amount they are requesting to replace the grant funds once they expire. This is true for all types of grantmakers including different levels of government, foundations, and corporations. Some grantmakers will not accept grant proposals from new nonprofit organizations that have operated for less than three years, the period that the Internal Revenue Service (IRS) considers probation for new tax-exempt charities.   

Unfortunately, there are very few grants you can use to start your nonprofit. Yes, there are those grant ‘experts’ that will tell you there is all this free money through grants for just this purpose.  We want you to understand these types of grants rarely exist.   

Other points to consider for new or extremely small nonprofits: 

You cannot secure grants while your nonprofit status is pending. Even though you filed your paperwork to receive designation as a 501(c)(3) tax-exempt charity, most grantmakers will not provide you with a grant to operate your programs based on speculation. The only way you could secure a grant at this early stage is to work with a fiduciary agent such as another nonprofit with an established track record. 

New nonprofits, the annual income for start-up costs must be derived from sources other than grants. Grants are not the source for start-up costs for your organization. You must understand the nature of fundraising and learn how to solicit individuals, encourage all of your board members to make annual financial contributions, and secure corporate sponsors. Take a course or two in fundraising. Go online and obtain books on fundraising. Learn whatever it takes to raise money to support your organization 

Grants for general operating support are very rare. Most grantmakers want to provide grants only for new programs and one-time only projects. Others only want to fund programs that have a direct impact on the target population that you serve. Only until you have an established relationship with a grantmaker that supported your past program efforts will you be able to possibly secure an annual grant to assist with your general operating support costs.

 

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