When most people think about funding a nonprofit, they think they should look for grants.
Seems like a good idea, right?
After all, there are thousands of foundations out there that exist to give money away.
But, growing a nonprofit so you can fulfill your mission means having a fundraising plan with diverse revenue streams.
In order to raise the most money for your cause and create a stable future for your organization, you need several different sources of funding.
One of those sources can be grants, and you should go after all the grant money you can.
But interestingly, there are many times when grants are not the answer.
In fact, here are 12 examples of times when you should NOT look for grants.
1. When You’re Getting Started
Getting a grant to cover startup costs when you’re launching your new nonprofit is difficult, if not impossible.
Most foundations want to see 3-5 years’ experience first before they’ll give you money for programs.
It makes sense that they want to invest in proven winners, right?
They need to feel good about your track record and the impact your program is having.
You will be hard-pressed to find a funder to give you a grant before you’ve actually done anything.
You need time to build your reputation and prove that you’re doing good work.
While there are a few grant opportunities for startups, they’re scarce and very competitive.
You’re better off spending your time building a donor base and doing other kinds of fundraising while you get yourself ready for grants.
2. When You Need Money Fast
Let’s say your nonprofit has been looking for a vehicle.
The PERFECT one that will fit your needs was just listed for sale and at a great price!
Time is important. If you don’t snatch it up, you’ll lose it.
You have a need that is time sensitive, and you need money NOW.
A grant is NOT the best way to fund your new vehicle or any need you have where you need money fast. Why?
Because grants take time.
You have to put together your application, make sure you meet the criteria, and then wait for a decision (which can take weeks or maybe even months).
Even after a decision is made and you are approved, it can still take weeks to actually receive the funds.
Grants are not a quick source of funds for an immediate need, so don’t look for grants thinking you can get money fast.
3. For Ongoing Funding
Don’t count on grants for ongoing funding for your programs or operations.
Just because you received a grant from a foundation one year doesn’t mean you’ll receive it every year or ever again.
Don’t plan your organization’s budget and your income around the expectation that a grantor will continue to fund your needs.
You MIGHT find a family foundation that LOVES your work and wants to fund you every year, but that’s rare.
Definitely don’t assume that you will get a grant again next year unless the funder tells you to expect it.
4. For Programs That Are Invented Just to Receive a Grant
Never go after a grant and use it to start a program that wasn’t already in your plan.
Let’s say your organization helps children with dyslexia.
You find a grant that is open to organizations that help children with ADHD.
You need funds, so you decide to start a program to help kids with ADHD just so you can qualify.
Don’t create a program just to qualify for a grant. It’s called mission drift, and it can fragment your nonprofit’s focus and make it nearly impossible to explain to people what your organization does because your programs are all over the place.
We had a client like this once. They kept going after various grants from the State of Tennessee just because they could. They were successful and started several random programs that didn’t really have much in common. When those grants started drying up, they wanted to start donor-based fundraising. But it was tough to explain what the nonprofit did. Ultimately, they closed some of those programs to focus on the ones most relevant to their original mission.
If you don’t have a real need based on your current mission or something you have previously planned for, don’t look for grants.
5. For Urgent Needs
Sometimes things happen, and you need money for an urgent need.
Maybe your nonprofit responds to emergencies in the community and periodically, you need funds quickly to address critical needs –like a flood that wipes out half of your downtown, a family who lost their home in a fire, or an animal that needs surgery to fix a broken leg.
Or maybe you just discovered your treasurer hasn’t been keeping up with taxes or paying your rent.
You need money fast to address the urgent need. Just like in #2, grants are not a good source of funds when you need money fast.
It’s not a good idea to look for grants to meet urgent needs, either.
Grants are good to fund very specific programs and projects, but they are not designed to help meet those critical needs or rescue you from poor planning.
6. For Savings
You worked so hard to build that rainy day fund.
You did all the right things! You built your donor base, you have strong relationships in place, and you built a nice fat cushion into your bank account.
Well, over time it rained a little here, a little there, and maybe you dealt with a flood or two.
Before you knew it, your rainy day fund couldn’t even help you with a puddle.
What will you do to get that fund back up where it needs to be?
Not apply for a grant.
Grants are designed to help you serve your recipients and have a greater impact — not fill up your emergency fund.
Foundations want to fund operations and things you are putting into place to help your community.
Padding your back account doesn’t fit into that category, so don’t look for grants to fill up your rainy day fund.
7. For Fund Replenishment
Grants are not a good idea for replacing money you just spent.
Let’s say you run an animal rescue, and you have a medical fund to use for critical needs.
Recently, you rescued a dog with a multitude of health issues, and you spent thousands to save its life.
Or maybe you rescued a group of animals and they arrived at your rescue with a disease that required immediate medical treatment.
Those vet bills wiped out your medical fund, and now you’re afraid that if you get a call within the next few weeks asking you to take another animal with big needs, you won’t be able to say yes.
You need to raise some funds to replenish the medical costs you’ve just been out.
But not with a grant.
You will be hard-pressed to find a grantor who will replace money you’ve already spent.
Instead of trying to look for grants, try a virtual event or an appeal to fill your fund back up.
8. For Administration/Payroll
Unless a grant is set up specifically to help new nonprofits acquire and pay administrative staff, don’t apply.
Foundations get really excited about helping with hands-on work, facilities to help that hands-on work, supplies for that hands-on work, or anything else that assists with hands-on work.
They’re not so excited about paying administrative assistants or bookkeepers.
Although the administrative side of nonprofits is extremely important and helps keep your doors open, most grantors don’t dedicate funds to those purposes.
So don’t go looking for grants to cover your overhead expenses.
9. When You Need a Sponsorship
Be clear about what you need money for.
Sometimes you might look for grants when what you really need is a sponsorship.
Maybe your nonprofit needs office space. Or you want to purchase a vehicle and put the funder’s logo on the side. Or you’re having an event and need funders at the platinum and gold levels.
You’re probably better off looking for sponsors, instead of grants, in these cases.
There are lots of needs that can be sponsored for nonprofits by companies or individuals.
- A car dealer can sponsor you and provide a car for your nonprofit’s use.
- A property manager or a business park can sponsor you and provide a rent-free office.
- One of your vendors can sponsor you and provide a deep discount or free product.
- Or maybe a local business just wants to sponsor your event and get lots of recognition.
Get creative and think about everyone in your personal and professional networks.
Do they own businesses? If not, who do they work for?
One of my clients’ largest sponsorships came from a volunteer’s employer.
10. When You Can’t Measure the Impact
You REALLY want that car (yes, back to the car example!).
You REALLY think it will be instrumental in the work you do.
If you’re using the vehicle to execute your mission, you’ll need to be able to define how having that vehicle impacts the recipients of your services.
Can you deliver more meals? Rescue more animals?
Or are you just tired of using your personal car?
Asking for a grant comes with conditions. Grantors will want to know the impact of their gift.
When a foundation provides a grant, most often it is accompanied by a list of criteria and reporting requirements that you must complete.
You will receive these guidelines and sign an agreement before you receive the funds.
So make sure you can really quantify the impact of the grant and report back to the foundation in the timeframe they request it, or don’t apply for it.
11. When You Can’t Track Expenditures to the Penny
If you have a shaky bookkeeping system or you’re always having to ride your treasurer for real financial reports, don’t look for grants.
When you apply for a grant, you’re telling the funder that you’ll use the money for a very specific purpose.
If you don’t track every penny spent on that purpose, it’s possible that some of that grant money will be used for other things — and that’s not ethical.
In other words, you need strong accounting systems in place before you look for grants.
If you can’t commit to using the funds for ONLY the project you’ve asked for assistance with, and if you can’t commit that this will be tracked meticulously, then you need to find another way to raise funds.
If your record-keeping and financial information is a spreadsheet, don’t look for grants.
12. When You Can’t Spend It Fast Enough
Another requirement of many foundations is that you spend the money within a certain timeframe.
If you can’t spend the money fast enough because your program isn’t really ready, then don’t look for grants.
Funders usually have a timeframe to ensure that you’re actually doing what you said you will do (commonly 1 year), instead of hanging on to the money like it’s a savings account.
Receiving grant funds and then sitting on them because your project isn’t ready is a great way to make sure you’ll NEVER receive a grant from that foundation again.
So, if you aren’t ready to spend the money in the next year or so, don’t look for grants.
The Bottom Line
Grants are an excellent source of funding and can help your nonprofit start or grow a program, acquire a much-needed piece of equipment, and more.
But looking for and going after grants should not be the first thing you think of when you need money.