Types of Grant Opportunities for Nonprofits

To be financially successful, every nonprofit should understand the world of grants. From a distance, it seems that grantors distribute money to all kinds of organizations, all in the same way, using one set of criteria in the decision-making process. Also, many nonprofit organizations are under the impression that once they receive a signed check, they can use the funds any way they wish, without follow-up or oversight – nothing could be further from the truth.

Grantors award funds in a very strict manner and according to rigid sets of rules and criteria, which are often specific to each individual grant opportunity. Furthermore, funding is almost always accompanied by detailed reporting and oversight requirements, where the nonprofit is required to submit comprehensive compliance reports throughout the life of the awarded grant. It is also essential to understand that not all grants are the same. In general, grants can be divided into several different categories, each with their own requirements.

Program Grants

This type of grant is funding is to be used towards a specific program for use on particular project. When applying for a program grant, information must be included in the application pertaining to the specific details of the project, such as the budget, timeline, objectives, metrics, etc. In other words, the grantor needs to know the exact definition and scope of the project and, subsequently, exactly how the funds will be spent. Since tracking funds designated for a specific project is relatively simple, grantors tend to award program grants with greater frequency and in more significant amounts. These grants normally range anywhere from $25,000 to $250,000.

General Operating Grants

A general operating grant is a grant that finances the ongoing activities of a nonprofit organization. In contrast to other types of grants which are allocated for use in specific projects, a nonprofit can use the funds from a general operating grant according to its own discretion. For example, to cover salaries, rent, or other basic, ongoing activities. In general, this type of grant ranges from $50,000 to $100,000.

Unfortunately, grantors rarely award general operating grants today, mainly due to the frequency of abuse and misuse of funds in the past. Most foundations that give grants will now require extra levels of scrutiny before deciding to award general operating grants, if they even award this type of grant at all.

Capital Grants

Capital grants are typically used to fund the construction of buildings and structures, such as university departments, museum wings, hospital wards, and places of worship (e.g. churches, synagogues, and mosques). In general, capital grants end up being requests for very large sums of money, generally anywhere from $250,000 up to tens of millions of dollars. With such large funds, though, come certain catches. First, the grantor will often request naming rights to the building. Second, it is rare that a single grantor will cover the cost of a project in its entirety. Most of the time, the grantor will cover a certain percentage of the cost, meaning the organization must acquire the rest of the funds from other funding sources. Capital fund grantors will also often ask to see building plans before even considering a grant application. This means that a nonprofit must first be in a position to fund a significant amount of the building costs itself before it should even consider applying for a capital grant. Grant funders will typically not be a lead gift on a capital project.

Conditional Grants

A conditional grant is one that kicks in only when an organization succeeds in raising a designated amount of funding from another source. In most of these situations, a grantor will promise to match the amount of that other funding source. Conditional grants commonly come about when a donor wants to fund a project, but it will not finance the entire project and is unwilling to make the donation unless he knows that project will indeed receive all the required funding. Essentially, by offering a conditional grant, the grantor is requiring the organization to prove its ability to finance the project through to the end, before it is willing to contribute its share. In general, conditional grants are large – anywhere from $50,000 to $500,000 – and it is typically easy to convince grantors to approve such grants. However, conditional grants also come with risks. For example, in the situation where a nonprofit organization succeeds in securing funding from two separate conditional grants, it sometimes happens that neither grantor wants to be the first to write the check, and the funding for the project completely collapses.

Start-Up/Seed Grants

These grants can be hard to find and even harder to obtain. Exactly as the name suggests, a start-up or seed grant can be used to help a new nonprofit organization get off the ground and make it through the start-up stages. This type of grant is generally small – between $100 and $5,000 maximum.

Takeaways

It should be clear that choosing the right type of grant to pursue is critical to an organization’s ability to successfully secure grant funding. With such fierce competition for grants, more and more nonprofits have come to understand the importance of managing the process of resource development in an organized and professional manner, which includes only applying for the right grants from the right grantor. How can an organization determine which grants are the “right” grants? By knowing the goals and activities of the nonprofit inside and out and by taking the time to determine which grantors most support the type of work the organization does.