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How to Get Funding for Nonprofit Startup Costs

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While we tend to think of entrepreneurs as people who launch a business, they also exist in the world of charities, nonprofits, and foundations. A nonprofit entrepreneur sees a need that is being unmet in their community and builds an organization designed to change or improve those conditions. Like starting a for-profit enterprise, money is needed to get started, and nonprofit startup costs can be very similar to those in business. However, one difference between for-profit and not-for-profit is in the area of funding. Whereas most private businesses startup must rely on family or personal gifts and loans, nonprofit startup funding can come in the forms of grants and donations. 

This article will explore some of the most frequently asked questions for nonprofit startup costs and how to get funding to support the launch of your 501c(3).

FAQs About Nonprofit Startup Costs

What are incorporation fees, and how much do they cost?

The first nonprofit startup cost your organization needs to address is filing for incorporation. Each state and municipality will have different procedures for how to incorporate. In addition, some states require an annual permit fee from the Bureau of Charitable Organization. This permit allows the organization to fundraise and solicit donations from individuals, businesses, and foundations operating within state limits. If you plan on having a multi-state nonprofit, you will need to incorporate and secure fundraising permits for each state you’ll have a business presence in. Incorporation fees range from $200 to over $1,000 depending on organizational complexity and the states you’ll be operating in.

What is the application fee for IRS nonprofit tax exemption?

The second most important nonprofit startup cost is filing for tax exemption. Fees range from several hundred to several thousand dollars. If your nonprofit is a school, church, or charitable cause, you may file the 1023 EZ form, requiring less time and a lower fee. Other nonprofits may need to file the full 1023, which is more in-depth and carries a higher cost.

Are there 990 reporting fees?

You need to file a 990 every year to keep your nonprofit status. Nonprofits can sub-contract this report, or they can handle the responsibility internally. When undertaking 990 reporting internally, you’ll want to factor in costs for a bookkeeper, accountant, or fundraising manager for tracking expenses and revenue generated.

What are some ongoing costs for nonprofits?

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Ongoing costs may include the following:

Don’t let the list of nonprofit startup costs scare you away! Instead, take advantage of your enthusiasm and ideas and put them to use setting up your operating and strategic plans. Being focused on creating solid plans will help you when you begin to secure nonprofit startup funding.

How to Get Funding for a Nonprofit Startup

Holding fundraisers can generate contributions and community awareness, but securing grants, connecting with insurance companies, and advertising your successes, will provide you with more significant amounts of funding.

Frequently Asked Questions about Nonprofit Startup Costs

What are the best local sources for nonprofit startup funding?

Local and regional community foundations are a great source of funding for 501(c)3 organizations, and they are often an underutilized source. These foundations usually commit to a specific municipality, county, or region and sometimes offer additional grants specializing in particular sectors such as mental health, food scarcity, early childhood services, or elder services.

I’ve never written a grant before. What should I do?

Local foundations tend to be very approachable, and their grant managers want to develop relationships with community organizations because they understand the financial burden of nonprofit startup costs. Often, these foundations will offer grant writing workshops that can help newer nonprofits create effective grant proposals. While foundation awards may only be a few thousand dollars, they can still help launch a program or project. More importantly, being awarded a community foundation grant shows that your organization can successfully secure and administer funding.

What’s the most overlooked source of nonprofit startup funding?

Did you know that many insurance companies have separate foundations that offer grants? As most nonprofits need to have some form of insurance to protect against liability, consider including an insurance agent on your nonprofit’s advisory board as they may be able to help in the grant application process. Even if the awards are small, building up a track record of receiving grants will make a difference to your organization’s future.

Can advertising help me secure nonprofit startup funding?

Yes! Even if your grant awards are small, they can lead to other opportunities if you advertise them consistently. This constant communication shows other foundations and donors that their grants or gifts will receive the same publicity and thoughtful implementation. When your organization gets a grant, be sure to craft a glowing press release to share with news outlets, social media, and on your website. Prominently displaying foundation logos attracts attention and lets all visitors know that your charitable organization understands the value of showing appreciation.

Photo of a nonprofit starting funding meeting

Still Wondering About How to Get Funding for a Nonprofit Startup?

Contact BryteBridge Nonprofit Solutions! Every year we help thousands of entrepreneurs launch, grow, scale, and maintain nonprofits in their communities. Contact us today to connect with one of our experienced nonprofit consultants.