Do you need a grant in order to launch a project for your nonprofit? To gain funding, every nonprofit must understand the world of grants. Below, we will introduce you to that complicated world, and lay out the different types of grants for nonprofit organizations in a way that will enable you to understand and choose which ones are most relevant to your organization.
This article is brought to you by IDC Giving Group.
The world of fundraising for nonprofits is much more complicated than it first seems. From a distance, it appears that philanthropic foundations distribute money to all kinds of organizations, all in the same way, using one universal set of criteria in the decision-making process. In addition, many nonprofits are under the impression that once they receive a signed check, they can use the money as they wish, without any follow-up or oversight. Nothing could be further from the truth. Foundations award grants in a very strict manner, and according to set rules and criteria, which are often specific to each individual grant. Furthermore, the funding is accompanied by detailed reporting and oversight requirements, where the nonprofits must submit comprehensive compliance reports throughout the life of project. It is also worth noting that not all donations and grants for nonprofit organizations are the same. In general , they can be divided into several different categories, each one with its own requirements and amounts. To learn more about grant writing for non-profits, read on.
Start-Up/Seed Grants
Exactly as the name suggests, a start-up (or seed) grant helps a new organization get off the ground and make it through the beginning stages of the organization, which can be particularly difficult. This type of grant is generally small—between $5,000 and $25,000—and is given in the form of a check or bank transfer. Seed grants tend to be the only type of grants that foundations will consistently award to start-up nonprofits.
General Operating Grants
A general operating grant is a grant that finances the ongoing activities of an organization. In contrast to other types of grants which are allocated for use in specific projects, a nonprofit can use the funds from a general operating grant according to its own discretion. For example, to cover salaries, rent, or other basic, ongoing activities. In general, this type of grant ranges from $50,000 to $100,000, and is given in the form of a check or bank transfer.
Unfortunately, philanthropic foundations that give grants rarely award general operating grants today, mainly due to the frequency of abuse and misuse of funds in the past. Most foundations that give grants will now require extra levels of scrutiny before deciding to award general operating grants, if they even award this types of grant at all.
Specific Program Grants
A foundation will award a specific program grant for use on particular project. When applying for such a grant, your nonprofit must include in the application specific details of the project, such as the budget, timeline, objectives, metrics, etc. In other words, the foundation wants to know the exact definition and scope of the project and, subsequently, exactly how the money will be spent. Since tracking the funds designated for a specific project is relatively simple, foundations tend to award specific program grants with greater frequency and in greater amounts. Specific program grants tend to range anywhere from $25,000 to $250,000. Generally, foundations transfer the funds as a lump sum at the completion of the project, and upon the receipt of an invoice signed by a certified accountant.
It is important to note, however, that receiving funds earmarked for specific projects also has its disadvantages. For example, specific program grants often do not cover taxes, general operating expenses, or salaries of those involved in the project. In such cases, the funds awarded will not be enough to cover the entire cost of the project, and your nonprofit will suddenly find itself in a very difficult position financially. Therefore, when grant writing for non-profits, it is imperative to lay out very clearly from the very beginning what expenses the grant will and will not cover, for which purposes the money may be used, as well as how your organization plans to use surplus funds (if applicable). By doing so, you will ensure that your organization will not be left with any unexpected expenses at the end of the project.
Capital Grants
Capital grants fund the construction of physical buildings and structures, such as university departments, museum wings, hospital wards, and places of worship (e.g. churches, synagogues, and mosques). In general, capital grants are for very large sums of money: from $250,000 up to tens of millions of dollars. With such a large grant, though, comes certain catches. First, the donor will often request naming rights to the building. In addition, the donor will sometimes request a type of exclusivity in the funding that limits or even prevents other donors from adding their own donations. Second, it is rare that a single donor will cover the cost of the project in its entirety. Most of the time, the donor will cover a large percentage of the cost, meaning the nonprofit must acquire the rest of the funds from other private, state and government sources. In addition, donors of capital grants will often ask to see the building plans—or even the skeleton of the building—before even considering the grant application. This means that a nonprofit must be in a position to fund a significant amount of the building costs itself before it can even apply for a capital grant.
If your organization is considering applying for a capital grant, you must figure out how to deal with these potential stumbling blocks at the very start, in order to avoid a situation where you run out of funding in the middle of the project.
Conditional Grants
A conditional grant is one that kicks in only when an organization succeeds in raising a designated amount of funding from another source. In most of these situations, a foundation will promise to match the amount of that other funding source. Conditional grants commonly come about when a donor wants to fund a project, but will not finance the entire project, and is unwilling to make the donation unless he knows that project will indeed receive all the required funding. Essentially, by offering a conditional grant, the donor is requiring the nonprofit to prove its ability to finance the project through to the end, before he is willing to contribute his share. In general, conditional grants are large—anywhere from $50,000 to $500,000—and it is relatively easy to convince philanthropic foundations to approve such grants. However, conditional grants also come with risks. For example, in a situation where an organization succeeds in funding a project from two separate conditional grants, it sometimes happens that neither donor wants to be the first to write the check, and the funding for the project completely collapses.
How to get Grants for Nonprofit Organizations – The Right Grant for the Right Nonprofit
From everything you have read above, it is clear that choosing the right type of grant is critical to your ability to achieve funding. With such fierce competition for grants, more and more nonprofits have come to understand the importance of managing the process of resource development in an organized and professional manner, which includes only applying for the right grants from the right grantor. How do you know which foundations are the “right” foundations? By knowing the goals and activities of your nonprofit inside and out, and by researching which foundations support the type of work that you do. Such knowledge will enable you to discern which types of grants are appropriate for your nonprofit, allow you to direct your grant requests to the appropriate foundations, and, ultimately, help you to achieve funding for your organization.
Debra Kagan is the CEO of IDC Giving Group. She holds a B.A. in Interdisciplinary Studies, Professional Certification in Non-Profit Management from the New York Institute of Finance and has managed hundreds of client cases and grant requests, successfully bringing millions of dollars to a wide array of nonprofits. As a member of the Association for Fundraising Professionals (AFP), Debra and the IDC Giving Group team deliver high-quality, professional resource development services and strategies that allow your nonprofit to achieve new heights: no longer compelled to concentrate exclusively on the needs of today, but able to plan for tomorrow create an impact well into the future.
The consultants, writers, researchers, analysts and financial consultants at IDC Giving Group have a range of professional and personal experience. They represent a broad spectrum of academic disciplines and offer resources accrued from relationships with a variety of organizations and foundations. With proven efficiency and a comprehensive understanding of the grant-writing process, IDC Giving Group is prepared to lead you towards success. For more information, call 1-866-744-4995 or email info@idcgivinggroup.com today!