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Getting Ready for Grants, Part 1: The Basics

Getting Ready for Grants, Part 1: The Basics

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So you started a nonprofit or are thinking about starting one, and now you need grant funding. You know grants are given to nonprofits but you are unsure about what you need to do to get started. This article will hopefully provide you with the information.

The vast majority of grants require you are either a public entity like a school district, college or municipality, or a federally recognized nonprofit organization called a 510c3. I often get calls from people starting or running small businesses who have been told because they are a woman or a minority or have a disability they would qualify for a grant. The answer is these types of grants are very, very rare and if available at all are offered at the local level. For instance, a city might want to promote certain neighborhoods struggling with blight and lack of commerce, so they offer grants to businesses in certain zip codes. I have seen these in DC and Chicago. But again, they are rare.

The federal government typically only offers grants to small businesses for high-tech start-ups usually in only these categories: Healthcare, education, green energy and agriculture. These programs encourage small firms to undertake scientific research to help meet federal research and development objectives and have a high potential for commercialization if successful. But for a standard type business such as a hair salon or landscaping company, you are probably not going to be eligible for a grant.

Step one

Obtain your 501c3 status and make sure your paperwork is up to date and in order. There are certain things a 501c3 must do each year and the discussion of how to start and run a nonprofit is beyond the scope of this article. Basically, if your organization provides a nonpolitical social or educational service to a community then you would qualify to become a nonprofit organization who does not pay taxes and would be eligible for grants. Nonprofit faith based organizations are also eligible for grants at both the federal, state and foundation level.

Step two

Obtain a financial audit from an accountant. Most grants require you submit paperwork along with the grant proposal verifying your finances are in order and transparent. Typically this paperwork is called “Audited Financial Statements”. You might not have very much income to start, but you need a CPA to look at your books and advise you from the start.

Step three

Have a clear mission statement. This can be general and, in fact, the more general it is the more grants you would qualify for. For instance, I have a client whose mission statement is “To help Navajo woman, children and families.” With a clear but broad statement such as this, they apply for (and win) a wide variety of grant programs to achieve their goals of helping people of the Navajo Nation. They have afterschool programs, health and nutrition programs, business start-up and training programs and a farmer’s market and small farmer training program, among others.

Step four

Gather community support. Grants rarely fund 100% of your programs. They usually want to see you have funding from other sources to ensure viability of your program. A grant is like applying for a loan. Even though you do not have to pay a grant back, the funder or lender wants to make sure they are making a good investment. So just like you often need collateral for a loan, a grant often will require you have what is known as “Matching Funds.” Some grants do not require this but your proposal will always be stronger when you demonstrate matching funds. Some require a percentage like 10% or 20% and some require what is known as 1 to 1. So if the match is 10%, if you ask for 100K they expect you to provide 10K in matching funds. If it is 1 to 1 and you ask for 100K they expect you to bring another 100K to the table.

Do a mailer to everyone in your community and ask for donations and tell them who you are. Send a mailer to local businesses. Have a fundraising car wash. Have a kick-off afternoon at the park. Brainstorm for other creative ideas. Let everyone in the community know you are a nonprofit organization, state your mission and ask for support.

Step 5

Develop community collaborations with other nonprofits and businesses. Most grants require an applicant for a program to demonstrate they can provide what is known as “Wrap-Around Services”. For instance, if your mission is to combat drug abuse in your community, there are a lot of related services required in order to be competitive for a grant and you will not be able to do it all. You might do outreach and educational services related to prevention but you will need a health center or hospital partner to deal with emergencies and treatment. You will need law enforcement to collaborate with you on enforcement strategies. You will need sexual assault and domestic violence prevention and assistance centers to refer people. You should probably have a transitional living facility ready to assist with homelessness and temporary housing. You will need the local schools to collaborate for educational services and a workforce development center and a community college for job training and employment services. When you apply for a grant, funders want to see you have collaborators to handle all aspects of the problem you are trying to solve.

In conclusion, to get ready for grants, there are a number of preliminary, basic steps which should be in place before you start actually identifying grants and writing proposals.

Step 1: Make sure you have a 501c3 and your paperwork is in order.

Step 2: Have a CPA provide you with a financial audit and ongoing tax consultations. You will need a third party to verify your organization’s finances are in order when you ask for funding.

Step 3: Have a clear mission statement.

Step 4: Develop local funding sources

Step 5: Develop community collaborations

In Getting Ready For Grants, Part 2 we will discuss the steps after the basics such as identifying funding opportunities and determining which grants are actually good opportunities for your organization.

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