When it comes to securing crucial funds for nonprofits to carry out their mission and implement their programs, sooner than later, many organizations turn their attention towards the grants’ world.
So, have you ever wondered how nonprofits receive grants?
We are here to guide you, regardless if you are already “kind-of” familiar with the process or are just taking the first steps.
In this article, we’ll help you understand how nonprofits receive grants through the different funding sources available; who are the main funders; what they fund and how to apply.
Our step-by-step method will guide you to find the types of grants that are the right fit for your organization, thus unlocking your ability to successfully submit grant proposals and get awarded!
How Common is Grant Funding Among Nonprofits?
Nonprofit organizations are vital actors in the communities they serve because they are mission driven and strive to provide services mostly to underserved or vulnerable populations.
However, generating nonprofit revenues can be an extremely challenging task.
So, what’s the answer? What are the main funding sources for nonprofit organizations?
Most nonprofits sustain their programs essentially through a mix of private contributions, donations (including in- kind), fundraising activities and events, fees charged for certain services (including membership) or sales of goods/items.
Many nonprofits understand that they must diversify their funding sources to boost their financial stability.
Don’t get discouraged! In the United States there are about 87,000 grant-making foundations and over 900 federal grant programs you can source through Grants.gov.
Great news! Nowadays, it is a widespread practice for many nonprofits to submit project proposals aimed at receiving the 25-30% of their total projected revenues from awarded grants. As reported by respondents to the The 2021 State of Grantseeking™ Survey, 90% of them submitted at least one grant proposal in 2020.
Generally speaking, grants are requests to receive funds distributed by a variety of entities (private charitable foundations, public government bodies, grant-making institutions and corporations, businesses and corporations) through complex contracts.
According to The 2021 Grant Seeking Report, “more frequent award rates were reported from private foundations (84%), community foundations (75%), and corporate grantmakers (73%). Among government funding sources, state government and local government award rates (both 70%) were higher than those of the Federal government (54%)”.
What are the Different Types of Grant Funders for Nonprofits?
Essentially, nonprofits know that there IS money available out there but have to figure where it is and how to get it. Does this sound like you?
Here is the juicy part! As mentioned already, you first need to become familiar with the different types of funders and grants, while understanding the process to generate nonprofit revenue through them.
1. Private Family Foundations
Private family foundations are established by a family and exist to preserve family assets and to take advantage of tax breaks while pursuing their philanthropic goals. Their mission is always aligned with the donors’ values.
2. Corporate Foundations
Corporate Foundations are philanthropic organizations created as separate entities from their parent companies, which fund their activities. They often choose to fund projects within the communities in which they conduct business. A great example is the Target Foundation that distributes funds to support their community.
3. Public Foundations and Community Foundations
Public Foundations have a public charity status and represent the public interest. Usually, they derive their funding from a variety of public sources rather than one type of source. United Way is an example of a Public Foundation; you can find tons of United Way profiles on Instrumentl like this one.
A Community Foundation is a public foundation where local families have contributed to pool their financial resources to benefit the nonprofit sector of the community. Here is an example of the Morris Community Foundation on Instrumentl.
4. Government Funding
Government funding, which is sourced at all levels of government-federal, state, and local-can be the easiest source for general operating support as opposed to program/project funding. However, government funding requires bureaucratic paperwork and complex processes aimed at selecting the most promising and compliant organizations.
What to Know About Each Type of Nonprofit Grant
Now that we have learned great information about the funders, let’s see what are the main types of grants for nonprofits!
1. Program/project grants
Program grants are funds disbursed for programs or projects that have specific, restricted, clearly described applications. Each program or project should have its own goals, proposed staff, clearly outlined activities, expected outcomes, and line item budget.
2. General operating grants
General operating grants support the organizations' mission instead of a specific program.
Funds are provided to run the business of the nonprofit, for instance the received money might be used for rent, payroll, utilities, internet, marketing, technology infrastructure, fundraising development.
3. Grants for Capital Funding
Capital funds are offered to support a variety of activities aimed at raising capital. Nonprofits , for example, may seek capital support for construction or purchase of a new building or equipment, or other large projects.
4. In-Kind grant contributions
Many corporations and foundations offer in-kind grants to provide assistance in the form of non-monetary support (oftentimes donations or services or goods that might be used towards a specific program).
What's the Process for Nonprofits to Receive Grants?
Step One: Are you grants ready?
Never overlook the first step of the ladder! Firstly, you need to verify if your organization is technically ready to apply for grants.
How? There are many grant readiness assessment tools available, mainly in the form of a checklist that will assess your readiness (in terms of eligibility, program detail, leadership, impact, community relationship, strategic planning, to name a few) to submit grant applications to foundations, corporations, and government bodies.
Step Two: Know your why and be clear
Your success in grant funding heavily depends on your ability to find the right match for your nonprofit.
If you are looking for funds to support your program, make an internal assessment to clarify why your services are so needed in the community for the population you serve and be ready to make your case supported by data and relevant information!
Step Three: Do your research
Every funder has its own set of guidelines and requirements and its specific templates for applications. Some funders are very precise about what they want (especially the government)while others can be vague.
Choose funders that don’t keep you guessing and allow you to be true to your core values.
Pay attention to funders’ guidelines. The guidelines tell you what they fund and do not fund; the range of monies they grant; eligibility criteria; how to apply, and submission deadlines as well as contact information.
Make sure you find the funders in alignment with your vision and mission, because chasing the money will never work!
Using an institutional fundraising tool like Instrumentl will help you narrow down the list of potential funders.
Step Four: Create your prospects list and a grant calendar
As simple as it is, you must compile your research in a clear document that records the main information related to the funders: their eligibility criteria (Who do they fund? Where? Which activities?), their mission, required documentation to be attached to the proposal, other requirements (partnerships?), and their deadlines.
Creating a grant calendar with a clear indication of which grants you want to submit and when throughout the year will assist you in nailing your financial goals!
Instrumentl can help here because our unique matching algorithm will consider your nonprofit’s profile, and identify good fit funders who have active grant opportunities that you can pursue.
If you’ve never created a free account, you can do so and find hundreds of new good fit funders for your nonprofit. Create your free 14-day account here.
Step Five: Reach out and create a relationship
Many funders, especially private foundations and corporations, will greatly appreciate you giving them a call to verify if you are a good fit for them. Ask as many questions you need to have it all clear. They love to give money away to support the causes they care for.
For the government grants there is always a person assigned to the specific grant. Even if you are not asked to create a relationship with the Federal Agency, creating a relationship with the assigned Grant Manager or Program officer will help you avoid fatal flaws that will prevent you from being successful. Government grants tend to be very complex: ask questions when in doubt.
Don’t be shy and don’t underestimate the power of authentic and meaningful connections!
Step Six: Craft your proposal
Craft your grant proposal making your case through a strong statement of need and a detailed program description.
If the funder provides an online application, review it and gather all the information requested before you fill it out (also it is recommended to always keep a backup file of your draft). In other cases the funder requires a letter of interest or inquiry (LOI) and you must provide exactly what they request.
Sometimes the funder requires only a one-page proposal summary (write one page, no more!). Sometimes, they want a full proposal: thoroughly follow the requirements of the grant you are applying for (eligibility, physical/geographic location, required documentation, formatting requirements, deadline).
Make sure you show your funder the impact that your program can make, your organizational ability, and how you will measure your performance throughout the life of the project. Don’t forget to showcase your past outcomes, if any! Results achieved in past programs will boost your chances to get awarded.
Have someone review your proposal. Have someone else review the reviewed draft to make sure your proposal is strong, compelling and in compliance.
Click submit and keep your fingers crossed.
Step Seven: You got the award, now what?
There ‘s nothing more exciting than receiving that email in your inbox, or that check in the mail letting you know that you WON.
Fantastic, you DID IT. And now? You need to keep calm and stay focused on your next steps.
Make sure you keep in contact with your funder and always submit the required reports in a timely manner (often quarterly).
If for any reason, you encounter unexpected challenges in your program implementation that may impact your performance or projected outcomes, make sure you let your funder know….on time!
In most cases they will adjust their expectations accordingly if you are in good faith and will be glad you reached out.
Wrapping Things Up: How Do Nonprofits Receive Grants
Finally, we’ve unveiled the mystery behind your question “how do nonprofit receive grants?”
Mastering the art of generating diversified streams of revenue through the different types of grants for nonprofits, including government grants for nonprofits and grants for new nonprofits should not be second guessed.
Grantmakers are willing to give their money away to nonprofits that match their specific vision for how the money has to be distributed to fulfill their (and your) mission.
Usually, the source of the funding, whether one person, a foundation, a company or government funding, has its own requirements and you have the tools now to navigate their systems.
Verify if you are ready, be true to your why, do your research, match your nonprofit’s needs to the proper funding source and submit an application that complies with the funder’s guidelines. At this point... the sky's the limit!