What are grants?
Grants can be used for many purposes, including supporting your online fundraising and crowdfunding. Grants are essentially donations that are given by institutions rather than individuals.
Grants can range in size from a few hundred dollars to millions of dollars, depending on the source, type, and purpose of the grant. Nonprofits that receive grants are generally required to submit one or more written reports to the funder.
Getting a grant is a different process than getting a donation from an individual. For grants, a nonprofit generally needs to submit a written request to the grantor (usually a foundation, corporation, or government entity) to ask for funds and specify how they will be used.
Foundations in the U.S. are required by law to disburse 5% of their assets annually in the form of grants, resulting in approximately $47B in grants. While that may seem like a lot of money, it pales in comparison to the amount of money given annually by individual donors in the U.S. — $217.79B in 2011.
Nevertheless, grants are a critical source of support for most nonprofits. A recent study conducted by PhilanTech and GrantStation revealed that 46% of nonprofits rely on grants from more than a quarter of their annual revenue.
Why you need to look for grants
Nonprofits traditionally start by relying on individual donors (frequently friends and family, then other individuals as the organization grows and more people hear about it). As they grow, nonprofits need to diversify their funding sources while growing their base of support.
There are three big reasons why you should pursue grants for your organization:
1. They help your organization grow
Growing organizations have a range of funding needs. Generating support from different sources can both help grow the organization’s revenue overall, and provide different pools of funding to support different efforts within the organization.
2. They help you reduce risk
Just like balancing your 401k, having different types of donations can help you reduce risk. If an organization relies too heavily on one source of funding, and that source of support disappears (due to economic conditions, personal preference, competition, or some other reason), the nonprofit can end up in dire financial straits.
3. They can come in large sums
While some grants are quite small, grants are typically larger sums of money than most individual donations. A grant can be tens of thousands of dollars — or even millions! Grants can also be awarded over a period of years (e.g., $60,000 over 3 years, which results in $20,000 going to the nonprofit per year), and can be helpful in making a larger investment in a specific program.
Four Types of Foundations
There are over 77,000 foundations in the U.S., according to the Foundation Center. They are divided into four categories:
1. Independent Foundations
Also known as private foundations, these organizations are generally established by high net worth individuals, sometimes families. They range widely in size and focus, from foundations that have no staff and award a handful of grants to local organizations, to the Gates Foundation, the largest private foundation.
2. Community Foundations
As the name suggests, community foundations award grants to their local communities. They are frequently comprised of a series of donor advised funds, where individual donors place funds in accounts with the community foundation, and the foundation staff help direct the funds, through their knowledge of the community, to different organizations.
Ultimately, the donors decide where and how grants are awarded. Community foundations can be a great starting point for an organization that is just beginning to seek grants. Since community foundations are specifically focused on impacting their local area, many have great resources to help local nonprofits succeed, including training or other resources related to fundraising.
3. Corporate Foundations
Many companies will set up foundations that are distinct organizations from the corporation. The corporation will donate some of its profits to the foundation to be distributed in the form of grants to the communities in which the corporation operates.
Not all corporations (even those that are active donors) have separate foundations; some corporate giving programs are managed directly through the corporation, and/or consist of donations from employees (sometimes matched by the corporation) to charities of the employee’s choosing.
4. Operating Foundations
Operating foundations generally use funds for programs that they themselves design and implement. Operating foundations are generally not a large source of grants for other organizations. There are also grant-making public charities (organizations that are not structured as foundations, but award grants to other charities), such as Ms. Foundation for Women.
Common Types of Grants
There are many different types of grants, but the four most common and relevant types for organizations getting started are:
1. Program support
Program support grants are the most common type of grant. Th seiarerestricted grant sto be used only for the specific purpose outlined in the grant request. Program support grants can generally not be used to cover administrative expenses.
2. General operating support
General operating support grants are the least restrictive (and most sought-after) type of grant. They can be used by the recipient to cover any expense, but the majority of foundations do not give large amounts of unrestricted support, preferring to give less than 10% of their grants in the form of general operating support though.
3. Research grants
Many health-oriented foundations in particular will provide research grants, generally awarded to academics, scientists and other researchers working on particular issues. Frequently, research grants will be payable to the institution (e.g., a university) with which the researcher is affiliated.
Research grants are not necessarily common for young organizations, but an important source of funding for many organizations paving new ground on an issue.
4. Matching grants
Foundations of all varieties may provide matching grants. In other words, the foundation will commit to a particular amount of grant money provided that the nonprofit is able to raise an equal amount of money from other sources. We’ll come back to this in a few examples below.
Using Grants for Online Fundraising
Even though the primary purpose for grants is to help your organization grow, they can be used to increase how much you raise online. Let’s walk through three common methods on using grants for online fundraising.
Method 1: Donation matching
One of the proven ways to instantly get more online donations is to use a matching grant as an incentive. Nonprofits typically structure a campaign by saying a foundation will match donations up to a certain limit or the grant will only be made if individual donations exceed a certain goal.
Case: The Adventure Project World Water Day Campaign
The Adventure Project (TAP) received a pledge from the Prem Wat Foundation to provide a grant of $10,000 if TAP was able to raise $10,000 online for World Water Day. The matching grant spurred donors and personal fundraisers to action. TAP exceeded their fundraising goal in 24 hours.
Case: Restore NYC Brick by Brick Campaign
Restore NYC received a $70,000 pledge from a major donor if they were able to raise $50,000 online through new donors. Within 40 days, Restore NYC exceeded their goal. Some donors even created their own matching donation on their personal fundraising page.
Method 2: Capacity building
The more equipped a nonprofit’s staff is, then the more they will be able to create a social impact. Grants can be used to fund training in online fundraising as well as fundraising consulting services from an experienced professional.
Case: New York League of Conservation Voters Education Fund
The New York League of Conservation Voters Education Fund received a capacity building grant to develop a new organizational brand strategy. This helped the nonprofit create new messaging, which helped develop compelling stories for fundraising, as well as new and improved ways to resonate with donors.
Method 3: Social proof
Donors want to make sure that their donation is going to a trustworthy and credible nonprofit. The indirect benefit of receiving a grant is that your organization is validated and proven trustworthy. You have the ability to say that professionals and large funders have reviewed you.
How to Get Grants from Foundations
Note: this section is also useful to nonprofits that have received grants before, but are looking to get more grants.
Getting your first grant can be challenging. In many cases, foundations have pre-established relationships with the organization they fund. How do you get your foot into the door? With preparation and hard work, you can position yourself to get a that first grant.
While each funder has its own requirements, preferences, and particular ways of evaluating proposals, there are several things you should have in place (and be sure that you can demonstrate) before beginning a grant application.
1. Track record
First and foremost, funders want to know that your organization has already done some good work. Have you been delivering the program or service for which you are fundraising for several years? What has your track record been? What have been some of your greatest successes?
Most foundations unfortunately do not like to fund entirely new organizations, or entirely new programs run by organizations that are not able to demonstrate much of a track record. Are people talking about how great your program is? Gather some stories.
Have you made a noticeable difference in addressing whatever the social issue is that your organization tackles? Gather as much quantitative and qualitative information as you can about what your organization has accomplished.
Many funders will not want to be the sole source of support for a program, so the funder will likely want to know what will happen if your organization is not able to raise all of the funds you are looking to raise. For example, if your budget calls for $100,000 in foundation support and you’re requesting a $25,000 grant from Foundation A, Foundation A will want to know how you plan to deliver the program if Foundations B, C, and D decide not to award grants.
By the same token, if Foundation A gives you that $25,000 grant for one year (even if the other foundations jump on board), they will want to know how you plan to continue the program after the term of the grant ends.
3. Management team
Grant makers are going to evaluate your team just as much as your programs. They want high potential change-makers that they believe can create a social impact.
A few questions they will ask — Who is running the organization? Who is running the program? Do they have the right experience to make the program successful? Do they have the right experience to make the organization successful? Have they run similar organizations or similar programs in the past? Who is on the organization’s board? How involved is the board with the organization?
Every funder asks for a budget, and most ask for audited financials. If your organization is not large enough to require an annual audit, you should be prepared to explain your finances to the funder in detail. If you’re planning to pursue several foundation grants, it’s worth talking to an accountant about getting the organization’s financials audited.
Regardless, your financial information should be clean, detailed, and correct. Incorrect financial information (e.g., a balance sheet that does not balance) can sink a grant request very quickly.
5. Ability to implement
If the funder awards a grant to your organization, will you be able to execute and deliver the social or environmental benefit the grant is intended to fund? If you have a track record, it’s easier to make the case that past success breeds future success. If your organization does not have a successful track record delivering the program you are trying to fund, you will need to go out of your way to ensure that you’re making a strong case about how your team will be able to execute the program successfully.
While your internal structure and how you present your organization are critically important, it is also critically important that what you’re presenting meets the funder’s requirements and guidelines.
Almost all funders will convey via their website (if they have one) or another publication what they will and will not fund. If your program isn’t in an issue area that is of interest to the foundation, you’ll have a low chance of getting a grant.
Finding the right foundation for grants
1. Ask around
The easiest way to identify funders is to start talking to people in your community. Ask them who the major funders are in the area. Who are the funders who are inclined to support smaller or newer organizations? Who are the funders who support the issue area in which your organization operates? Does your community have a community foundation? If so, does that community foundation provide resources for grant seekers?
2. Conduct online research
The next method is to do online research. The Foundation Center’s Foundation Directory Online, GrantStation, and PhilanTrack are great options. You can also go to the Foundation Center in person, if you live in a city where they have a library, or visit a cooperating collection.
In an online directory, you can search for foundations that are interested in the type of program your organization offers, and those that award grants in your local area. You can also use Google creatively to find foundations that meet those criteria.
3. Find mission alignment
One critical element of getting foundation funding is understanding how foundations work. While private foundations are required to disburse 5% of their assets in the form of grants annually, how and to whom the grants are disbursed is entirely up to the foundation.
Like your organization, foundations have missions. Those missions are frequently first determined by whomever donated the money to establish the foundation. In that case, the donor’s preferences, known as “donor intent,” determine the foundation’s giving.
Will providing a grant to your organization help the foundation achieve its mission? If the answer is no, then it’s not worth your time to apply. If the answer is yes, then think about how best to position your application to make it clear how well it aligns with the foundation’s mission.
4. Check foundation’s historical giving
Look at the foundation’s giving history to see if it has funded organizations that are similar to yours in the past. You can find a foundation’s giving history in several places: the foundation’s website (in some cases), foundation and grant directories like the Foundation Center and GrantStation (in some cases), and by looking at an organization’s tax filings, known as form 990-PF.
You can access a foundation’s 990-PF through PhilanTrack, or by searching for the foundation on the Foundation Center’s website (some foundations will also post their 990s on their own websites). When you look at the 990-PF, scroll to Part XV, page 11. There, the foundation will list all of the grants it awarded in the tax year covered by the 990.
Do some additional research about the organizations listed — how similar are their missions to your organization’s mission? Does support for those organizations suggest that the foundation may be interested in supporting yours? You’re looking for mission alignment so that you can be confident that the foundation is a good fit.
You can use PhilanTrack to research new potential funders, track contact and organizational information for the funders you want to pursue, then write the grant proposal to submit to the foundations that are most likely to support your organization and programs.
Getting started with grant proposals
Writing effective grant proposals is both an art and a science. A book could be written about the many factors that go into writing good grant proposals; in fact, many have! Here are a few tips to help get you started.
1. Funder requirements
Every foundation has its own requirements, everything from deadlines to what it will – and will not – fund, to how long proposals should be and how they should be submitted. The first step in writing a proposal to a particular funder is to know what that funder’s specific requirements are and be sure that you address them.
Applying to a funder that does not fund in your state or the type of organization you represent is clearly not a recipe for success, but neither is submitting a full proposal to a foundation that first wants to see a brief letter of inquiry, or submitting detailed program information to a funder that is looking for a summary and financial information.
2. Gather content
While each funder will have its own specific requirements, there are general categories of information that you should be prepared to address when writing proposals. Those categories include:
- Your organization’s history and mission
- A description of your target population, their needs, and the services that you provide to meet those needs
- A statement of why what your organization does is distinct from other programs and services serving your target population
- Major accomplishments to date
- Challenges and lessons learned with the program to date
- Expected accomplishments with the funding you’re trying to raise
- Evaluation — how you’ll know if you’re successful
- Team — senior leadership of the organization (including a board list) and the key staff who deliver the program whose activities you are trying to support
- Collaboration — is your organization working with any other organizations to address this issue?
- Financial information — audited financials (if you have them), a budget for the proposed program, a budget narrative explaining how the funds will be used
- Sustainability plan — how the program will continue if a) it isn’t funded by a given foundation b) after one year of foundation funding
- Attachments — your organization’s 501(c)(3) letter, audited financials (referenced above, annual report, board list)
3. Write compelling prose
Remember that a grant proposal is a persuasive piece, not an expository piece. You’re asking for money to fund something important. Make a clear case with compelling prose.
4. Produce tight financials
Virtually every funder will ask for financial information. Keep your books well and be prepared to produce both historical financial information and a budget for the upcoming year and the program for which you are looking for support.
This sounds obvious, but before you submit a grant proposal to a funder, proofread it. And have someone else in your organization proofread it, too. Mistakes can be very costly.
The list above is just scratching the surface, but should help send you in the right direction. In addition, the Foundation Center has some good resources for people getting started with grant proposals, Martin Teitel has written a great book about winning foundation grants, and you can use PhilanTrack to help manage the whole process.