A Guide to Learning about Nonprofit Grants and How to Qualify

So your idea for the perfect nonprofit is just a twinkle in your eye, huh? Or maybe your idea is already a fully incorporated nonprofit. That’s awesome! We salute your generous, do-gooding nature. 

Nonprofits are a small but mighty force for good. They only make up about 10% of the American workforce, but they generate hundreds of billions of dollars in economic activity each year: $878 billion in 2012 alone. Whether you’ve got your sights set on improving your neighborhood, your state or the whole wide world, grant money is out there to help you meet your goals. And we’re here to show you just how to get your piece of the grant money pie. 

What Exactly Is a Nonprofit?

Simply put, a nonprofit is a tax-exempt organization that does not operate for profit. You need to file with the IRS and meet certain criteria, like having a board of directors, to be designated as a nonprofit. The most common designations are 501(c)(3) and 501(c)(4), and each has different benefits and restrictions.

It’s possible to do charitable work without having official nonprofit status. Sometimes it’s even preferable, if you have a very small mission in mind, like running a local winter coat drive. But as your mission expands, the benefits of nonprofit status will far outweigh the difficulties of getting it. 

How Do I Start a Nonprofit?

To get your nonprofit rollin’, you should start by writing a nonprofit plan, just like businesses need a business plan in the for-profit world. Decide what population you will serve, what goals you’d like to accomplish annually for the next few years, and what your budget will be. (Be realistic!)

Ideally, you should already have some experience in your nonprofit’s focus area. If you’d like to start an animal shelter, having volunteered or worked at other shelters, or being a vet, will give you a better chance of success.

You’ll also need to find a source of labor. Many nonprofit organizations are volunteer-only in their first years, meaning no one draws a wage or salary, including the executive director. Other nonprofits budget for payroll right away. The second option means you’ll need to have steady funding up front, however.

Once you have a plan, you need to consult a lawyer and an accountant to help you navigate the rest of the process. Laws for nonprofits vary from state to state and are very complicated. It’s just not an option to DIY your nonprofit’s incorporation, unless you’re already a nonprofit lawyer. (Lucky you!)

Many states have their own “councils of nonprofits” to provide resources to local nonprofits. This includes referrals to lawyers and other experts. The National Council of Nonprofits also provides resources, although they do not help individual nonprofits incorporate.

What Is a Grant?

Kari Aanestad, a grant writing expert with the Minnesota Council of Nonprofits, says a grant is money given by a foundation or trust to a nonprofit in order to accomplish the nonprofit’s goals. Grants are different from donations because they are given for a specific purpose. They must be used for that purpose and the funds need to be carefully accounted for.

Grants are also competitive, with many nonprofits applying for each one. You will be going up against other nonprofits that also have plans for the money. That means you must make a convincing case for why your nonprofit deserves the money and what goals you will accomplish with it.

Grants can be large, even in the millions of dollars for well-established nonprofits, or very small, just a few hundred dollars. Different foundations and trusts specialize in different sizes of and uses for grants.

According to Aanestad, grants nearly always need to go toward specific projects or programs at nonprofits. They are not a good source of funding for overhead expenses like office rent or salaries for employees. (An exception would be if you are renting a space or hiring someone specifically for the new program or project.)

Some grants are designed to be renewed, too. If your program has been successful, you can reapply for the same amount or additional money in the future. Other grants will only be given one time, then they’re gone.

Who Can Qualify for a Grant?

Every grant’s eligibility is different because funders—foundations and trusts, who must follow their IRS-governed rules—have different reasons for wanting to fund projects. They often restrict what geographic areas, populations or program types they’ll fund.

A foundation or trust might choose to fund only children’s literacy programs in New York State, because that’s the area, population and type of program they’re most invested in.

Nearly all grants will require you to have 501(c)(3) status before receiving a grant, with some also allow 501(c)(4) organizations to apply. According to Aanestad, gaining official nonprofit status is the best first step towars getting grants.

How Do I Find Grants for a Nonprofit?

The best places to find grants are nonprofit grant databases. Some of these databases are free, while others charge subscription fees. 

GuideStar and GrantAdvisor are two free options, especially useful for new nonprofits. (Aanestad helped spearhead the GrantAdvisor project, which also allows nonprofits to write reviews of the grants they receive.) Foundation Center is a notable paid option. These databases allow you to filter by grant type, amount and more while searching.

Other ways to find grants include newsletters, nonprofit councils and networking with other nonprofits who may be willing to pass on leads.

How Do I Apply for a Grant for a Nonprofit?

Once you find a grant, look for their application guidelines. Their specifications may be very granular—down to font size and page numbering—or broad, just a few questions they’d like you to answer. Some require you to mail or email a document, while others allow you to complete the application online.

You will need to answer questions about what you’re planning to use the grant for. This includes a written description of the program or project, as well as a budget. The application should be free of spelling, grammatical and mathematical errors to the best of your ability.

The budget is often the most intimidating part of a grant application. Remember that funders expect you to be a good steward of their money, but they don’t expect you to anticipate every expense. The most important thing is to show you have done meticulous research.

As your nonprofit grows, you can hire freelance grant writers or even an in-house grant and funding expert. These specialists are experts in writing effective grant applications. This can increase your chances of receiving more funding to continue the good you’re doing.

How Long Does It Take to Get a Grant for a Nonprofit?

From identifying a grant you’d like to apply for to actually receiving the money, the grant application process can take as long as a year. This is another reason that grants are not ideal sources of ongoing funding for an organization. They are best used for special projects you wouldn’t be able to do otherwise.

Hopefully all of this info has been helpful in bringing you closer to bringing those nonprofit dreams true. And thank you for dreaming.