We advise a number of nonprofits who desire grants to fill in funding gaps. And while grants are a powerful way to receive a large influx of cash all at once, it's important to keep in mind that foundations like to play it safe. They consider grants an investment, and want to make sure that the nonprofit follows through by using funds in an impactful way.
Below are important questions to consider in determining whether your nonprofit is in the best position to apply for grants:
Is your nonprofit up to date on federal, state and local requirements?
In other words, has your nonprofit filed timely tax returns (IRS Form 990) and completed other requirements to keep its nonprofit status?
Is your nonprofit following its mission statement?
Foundations look closely to determine whether a nonprofit's mission matches the cause it wants to support. "Mission drift" occurs when a nonprofit forces its mission to match an application for grant funds. To prove that the nonprofit is truly following its mission, it's important to provide proof including:
- articles of incorporation and bylaws
- strategic plans
- financial statements and current budget
- brochures and other marketing materials
Can your nonprofit demonstrate success?
Most foundations are only interested in giving funds to a nonprofit that has a proven track record of success. For this reason, you'll want to highlight things that your nonprofit does really well. It's important to note that most foundations want to see that a nonprofit has been in existence for at least 3 years as this gives the nonprofit enough time to work out the best way to achieve its mission.
Does your nonprofit have a financial management system in place
Foundations generally require detailed reporting on how nonprofits are using their funds. This requires having strong financial procedures and a CPA to sign off on financial reports
Has your nonprofit successfully raised funds from other sources?
Foundations are more likely to fund a nonprofit that can prove it has successfully raised funds from other sources (e.g., individual donations, board member donations, corporate sponsors). For this reason, a nonprofit should always pursue diverse revenue streams, and not solely rely on grant funding to meet financial needs.
If after going through these questions you realize your nonprofit is not grant ready, we recommend choosing 1 or 2 areas to improve upon over the next six months, and coming up with feasible action steps to get you closer to your goal of becoming grant ready. By focusing on small steps today, you'll be ready to apply for grants in no time!
In service to you and your nonprofit's goals!