Text Box: New Nonprofit Organizations - Less than Three Years of Operation There are many challenges in starting a new or trying to grow a small nonprofit with mostly volunteer staff members and no cash flow. The most difficult challenge is raising money to support the overall organization including daily operations and programs or services. We receive many calls asking for our assistance to seek grants for start-up costs. Some callers 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. Plus, many more 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, you cannot use grants 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 the truth: these types of grants do not 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 with the IRS to receive a designation as an Internal Revenue Code (IRC) 501(c)(3) tax-exempt charity, no grantmaker will 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. With new nonprofits, the annual income for start-up costs must be derived from sources other than grants. As stated earlier, 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 from the nonprofit service organization within your state or at a local university that offers a certificate program in fundraising. Go to the library or online and obtain books on fundraising. Whatever you do, learn what it takes to raise money annually to support your organization. Please see our Links page for sources of classes and books. Grants for general operating support are very rare. Since the early 2000s, there has been a shift in the way grantmakers want to support organizations. Most want to provide grants only for new programs and one-time only projects including capital items such as buildings, renovations, and equipment purchases. 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. Continuation grants or continuing support from grants is even rarer. Foundation and corporate grantmakers no longer guarantee grant awards from year-to-year. In fact, many blatantly state that if your organization does not meet the outcomes outlined in your proposal, your program personnel do not file their reports on time, or the funds allocated through the grant were incorrectly spent, they have the right to revoke any future funding to the organization. Bottom line: you cannot rely on grants to be a perpetual source of income for your organization. Established yet Extremely Small Nonprofit Organizations At The Write Source, we work with established nonprofits with at least five of years of consistent income or revenue of $200,000 or more and a positive cash flow. This means that certain conditions must apply before we can help you be successful in obtaining grants for your programs and projects. The organization must have a mature budget originating from a variety of annual revenue sources. This includes a mix of fundraising activities, fees for service, interest income, and/or contracts with different levels of government. Grants from foundations and corporations are only going to be approximately 20 to 30 percent of your annual operating budget. If an organization relies too much on grants, no matter how worthy the program or how well-written the proposal, grantmakers will shy away from in investing in your organization. That is why grantmakers ask for your annual operating budget, audited financial statement, and review your most recently filed IRS Form 990. Your finances speak volumes to grantmakers. The organization must have a track record of effective programming. Grantmakers are venture philanthropists that want to invest in your organization and its capability to deliver programs and projects that satisfy their mission. They will investigate your organization thoroughly, read every word of your proposal, and potentially make site visits before they decide if and when they will provide your organization support through a grant. Having a reputation for planning and implementing programs that meet or exceed projected outcomes will help you succeed at obtaining grants for your future programs or projects. The organization must be ‘grant ready.’ When you inquire about our services, we also interview you to understand if your organization is ready to seek grants. Just because you saw a request for proposal or discovered a foundation or corporate grantmaker with similar interests doesn’t mean that it is the best fit for your program or project. While we do not guarantee the outcome of any of our efforts, we want to make sure that we provide you with the best possible proposal to submit to a grantmaker with the highest likelihood of funding your program or project. The proposed program or project in need of grant funding must work to satisfy the mission of the organization. When a nonprofit strays from its mission without direction provided by its strategic plan, the chances of securing a grant for a new initiative will be extremely difficult to almost non-existent. We will encourage nonprofits to form collaborative relationships with other organizations serving the target population to help it go beyond its current mission and meet the needs it identified in the community. © 1997-2008 The Write Source, LLC, Glastonbury, CT. All rights reserved.

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Text Box: Text Box: Is your organization ready to compete for grants? Here’s how to tell if it is.