Frequently asked questions about grants and nonprofits…

January 17th, 2007

The world of grants and nonprofits can be confusing for the uninitiated. Here are answers to some common questions — like “What is a 501c3?” and “How much does a grant writer get paid?” and many more.

Grants and nonprofits in general

Types of fundraising for nonprofits

Can I get a grant to… ?

Larissa’s services

Other professional grant seekers

The work of grant seeking

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What is a grant? Who’s eligible for them?

A grant is a single, relatively large donation of money to support a project or organization. The kind of donations that tend to be called “grants” usually come from an organization such as a foundation, whereas large donations from private parties tend to be called “gifts” or “donations.” However, the terms are somewhat interchangable.

Some grants are made to individuals for their projects, but many foundations require that their grants go only to charitable nonprofit organizations (501c3’s),
such as churches, homeless shelters, operas, universities, etc. Our book, Demystifying Grant Seeking, is all about getting grants for charitable nonprofits.

What is a 501c3 anyway, and how do I start one?

While we’re not lawyers, here’s our understanding of it. A 501c3 is a nonprofit corporation that is also a federally recognized charity. Some typical examples are museums, soup kitchens, churches, and so on. Not all nonprofit corporations are
501c3’s — for example, your local softball club might just be a nonprofit corporation, or it might not be formally incorporated at all. However, all 501c3’s are nonprofit corporations.

Most organizations find it desirable or necessary to incorporate in some form — be it nonprofit, cooperative, for-profit, etc. Whether you want to incorporate as a nonprofit and then go the extra step of becoming a 501c3 depends on what kind of fundraising you want to do. Many foundations require grant recipients to be 501c3’s. If you want your individual donors to be able to deduct their donations off their taxable income, then you need to be a 501c3. However, this factor is not important to all individual donors.

For more definitions and advice about how to start a nonprofit/501c3, try these sources:

1) http://nonprofit.about.com/c/esntl.htm?PM=ss10_nonprofit

2) your local library, which may have books especially relevant to your state.
3) a lawyer with nonprofit experience in your state — if you go down the nonprofit path, you’re going to need one eventually

But wait — SHOULD I start a 501c3?

Good question. Just because you CAN start a 501c3 doesn’t mean you always should. It takes a lot of effort to get one set up — realistically, hundreds of hours of forms, documents, and legalisms. Some of this effort could be reduced by getting a lawyer to do major or minor parts of it, but that will cost you money. It’s important to ask if forming a 501c3 is what you really need to do, or if you might make more of a difference for the world by spending that time working more directly on your cause.

If you have a small, short term project that is of a charitable nature, you
might consider doing it by yourself, without legal complications — or legal protections. (Obviously, your lawyer will discourage this. Talk to them before you raise money from others.) Alternatively you might seek to have your project performed under the “fiscal sponsorship” of an existing 501c3 (such as a church, youth shelter, art museum, etc), which might provide the legitimacy and protection you either want or need.

Some efforts really shouldn’t be a 501c3. For example, some athletes and teams that raise funds for themselves are not really asking for charitable donations — they’re fundraising by selling candy bars or (in a more sophisticated mode) they’re angling for corporate marketing money. They can organize as a regular for-profit or nonprofit corporation, or (if it seems appropriate) work as individuals.  Activists heavily involved in lobbying on legislation wouldn’t want to form a 501c3, where political lobbying is somewhat restricted.

Some projects and personalities seem more suited to slightly different types
of organizations than the formal 501c3. Remember it’s always possible to be an individual writer, artist, politician, or businessperson. There are also other “progressive” type of organizations you can join or start — such as a political party, activist group, prayer group, worker or consumer cooperative, or for-profit-but-idealistic-business.

We would suggest forming a new 501c3 only if what you want to do is unique, charitable, and will go on for more than a few years. “Uniqueness” might be the hardest standard to meet. There are thousands of new 501c3’s formed every year, and there might be one just around the corner that has the same idea you have. You should look around for them to make sure you’re not reinventing the wheel.

Forming committees for the common good is a major American pastime, something that was noted as far back as Alexis de Tocqueville’s Democracy in America. On one hand it seems to be a lovely expression of some ever-flowering will to mold a better world. On the other hand, in practice it can seem like a lot of bureaucratic wheel-spinning. To avoid the latter, keep your focus on your cause. Will forming a
501c3 significantly help your cause, or will it be a major distraction keeping you from making a difference?

If after all this discussion, it still makes sense to form a 501c3, Demystifying Grant Seeking can help you when you’re ready to look for grants.

What are the pros and cons of grants vs. other kinds of fundraising?

Often, the first fundraising idea people get for their project is “Hey, let’s apply for a grant.” That may or may not be the most logical thing to do. Grants have the advantage of being relatively large, but they are rarely quick, involving a wait of months or occasionally years. Moreover, grants are not available for every kind of need.

In contrast, individual donations tend to come in small pieces, but in sum they are your biggest potential source of money. Individuals can give money for nearly any purpose, and you can get responses from them quickly. If the purpose of your work is to publicize an issue or involve people, then your fundraising process can itself contribute to
your greater goals.

Most successful nonprofits have a mix of funding sources. Think carefully when you choose the kinds of fundraising your group will pursue. Every form– grants, individuals, events, etc. — has its pros and cons, but there are very few campaigns which should rely entirely on grants.

Read the first chapter of our book for more discussion of this subject.

Where can I learn about other kinds of fundraising?

See below, under “What other books and resources do you recommend?”

Can I get a grant to start my business?

We only claim to be experts about grants for charitable nonprofit organizations (501c3’s). We’ve heard there are government grants and loans available for specific kinds of for-profit businesses. But we admit we don’t know anything about them.

For information on for-profit fundraising in the United States, you might start at the US Government’s Small Business Administration. Also consider talking to free business counselors at the Service Corps of Retired Executives.

Can I get a grant for myself, for example, to travel?

Once again, we’re only experts on grants for charitable nonprofit organizations. However, there are grants for individuals, or alternatively, it might be possible to find
a charitable nonprofit to be your fiscal agent for a grant — assuming your project fits in with that agent’s mission. The Foundation Center has a page that might help give more information:

Do you do grant writing as a consultant? Can my nonprofit hire you?

Larissa currently consults with several Portland area nonprofits. She is not able to
take any new clients at this time. In fact, this is one the main reasons we wrote our book, Demystifying Grant Seeking — so we could share our expertise with more people even though we could not take on additional clients.

Do you teach your grant seeking system? Can you train our staff/volunteers/group?

Larissa does provide training on an individual basis for 501(c)3 organizations that want to start or revamp their grantseeking system. However, it takes a commitment to grant seeking from the staff and/or volunteers of an organization to make the most out of receiving training. Grant seeking is an ongoing repetitive process, and being trained and set up is just the beginning. Someone has to consistently work the grants system after it is in place.

If your organization is ready for grants and wants to get set up with individual training, Larissa can provide this. Full-day training for up to four people, resulting
in a grants system in your office, and including three sessions of follow-up coaching online or by phone, costs $2,000 plus travel.

Do you ever volunteer your services?

Yes, for nonprofits we’re closely involved with.  As with her paid work, though, Larissa is not able to take on any new volunteer commitments right now.

How do I find a professional “grant writer”? Can you recommend someone? How much should I expect to pay?

If you are a board member or staff member and you need to find a professional grant seeker in your area, you may want to start by asking your peers. Chances are some of the other nonprofit leaders you know have someone to recommend.

Another avenue to search is through your local development professionals’ membership organization. Ours here in Portland, Oregon is called Willamette Valley
Development Officers. To find one in your area, ask someone who does fundraising in your town or do a google search for something like “development officers oregon”. When you find your local group, contact them and ask if they have a directory of members who specialize in grants. Some may require that you become a member to gain access to their list (which might not hurt your cause) and others will probably share it freely.

How much you should expect to pay really varies with the type of job you need done, what skill level it requires, and how ready you are with planning and prioritizing. For example, we’ve worked for clients who are expert grant seekers themselves and simply needed an extra pair of hands for a few weeks, and for organizations that had never
done grant seeking, hadn’t done any research or planning, and were starting from square one. The latter kind of client is going to require a lot of work before even a single grant
proposal goes out.

Hourly fees in Portland range anywhere from $35 to $170, but most grant specialists will work out monthly or one-time project fees. Some charge more per hour
for shorter projects, such as one day trainings, than for ongoing work (because of the time and effort it takes to get started with each new client). The dollar range is different in each community, and so we recommend you get an idea of your local grants
landscape before settling on a fee with a consultant.

We strongly discourage paying grant seekers on a “percentage” or commission basis. This is a bad arrangement for both parties. The grant seeker might do a great job but have applications turned down due to forces beyond their control. And the organization that hired them can have its prospects for long-term fundraising damaged if their grant seeker gives in to the temptation to apply for inappropriate amounts of money, to apply to inappropriate funders, or to win grants at any cost.

I want to be a professional grant writer. How do I get started?
And what do I charge people?

There are two ways we can think of to get started. One would be to find an entry-level job at a medium-to-large-sized nonprofit, a nonprofit that’s big enough
to have several people in the development department. There you could assist with grant seeking (note we don’t say grant “writing,” because the work is much more than writing) and learn the ropes while your work is supervised by someone with more
experience.

The other would be to volunteer (say 5 or 10 hours per week) as a grant seeker for the development committee of a small local nonprofit. There are probably dozens of these in your area, organizations with a mission you believe in but without enough money to have someone working full-time on grant seeking. These are organizations where the few paid staff must split their time between running the organization’s programs, doing PR, fundraising, and a hundred other things. If you could come on as a volunteer grant
seeker and stick there for more than a few months or a few proposals, you would be a treasured resource for that organization. You would learn a lot because you’d be doing all the work of grant seeking — from strategizing to stamp-licking.

You can use Demystifying Grant Seeking as the guide for your work if you go the volunteer route. While we hate to keep harping on our book, this is EXACTLY the kind of scenario the book is designed to guide people through. It tells you in a step by
step manner exactly what actions to perform, and it explains the principles behind those actions.

After 6-12 months as a “serious volunteer,” you’d have a portfolio of work samples, and the beginnings of a track record. You’d be in a more credible position to apply for grant seeking work as an employee or a freelancer, though after 6-12 months you’d hardly be an expert. And you might well have done some real good for the world in the
process. :)

As far as what you should charge (as a freelancer/consultant), you’re going to have to learn what’s the standard for your area, and then probably start out on the low end of that scale. See our answer to the previous question for more details about price per hour and for why you should NOT work on commission.

You’ll find there’s a paradox involved in being a grant seeking consultant: the people that most need your help will probably be least able to pay you. They might be (like one of our local heros) waiting tables to pay the rent for their school for homeless youth. You’ll have to find a convergence between a price that’s acceptable to you, a price that’s acceptable for them, and a mission you believe in.

What other books or resources do you recommend?

Among books about grants, you might look into:

  • Grassroots Grants : An Activist’s Guide To Proposal Writing by Andy Robinson. Though it’s written from a very particular political point of view which you may or may not agree with, everyone can learn from the way Robinson shows it is not
    necessary to sacrifice one’s idealism to the fundraising process. There are also many examples of well-written grant narratives.
  • How Foundations Work by Dennis McIlnay. It describes grants from the funder’s point of view. Though more of an academic work than a how-to guide, it does provide some very interesting perspective about the inner workings of larger
    foundations. Very worthwhile for grant-seekers and grant-makers alike is his description of the ways that foundations can be essentially conservative and unimaginative in their choices.

For information about other kinds of fundraising, check out:

What is the first step in grant seeking?

Demystifying Grant Seeking describes grant seeking as a five-step cycle, where the first step is learning about your own organization, your community, and your potential funders. As a beginner the very first things you need to learn regard if your organization is ready to apply for grants. For example, do you have determination from the IRS that you are a nonprofit 501(c)3 tax exempt organization, and not a 509(a) private foundation? Or do you have a fiscal sponsor with those credentials? And do you have programs planned or in place, with the background and ability to implement them?

If you’re not quite ready to buy the book, you can check out a synopsis of the five steps in a “So you want to..” guide Larissa wrote for Amazon.com.

What is the biggest mistake you see grant seekers make?

Complexity, on many levels. Too many lists, leads, systems, spreadsheets, and too many papers saved in files and on desks. While grant seeking does involve managing a lot of paper and information, organization should just be a means to an end. If you’re spending more time organizing than researching or writing grants, something is wrong. Keep it simple so you can concentrate on your real work. For example, our book recommends using a simple paper form to keep track of your grant applications, rather than a complicated computer database.

Another mistake is writing narratives and budgets that are too complex for potential funders to enjoy reading. A grant narrative needs to establish a compelling
link between your community and its needs, your organization and its abilities, and your prospective funder and its interests. If you’ve done that (and you’ve met the application guidelines along the way), your narrative may not need any more verbiage.

Finally, too many people confuse personal friendships for business relationships. To be an effective grant seeker for your organization, especially over the long term, you don’t need a personal “in” with every prominent funder in the state. Rather, you need to create and develop business relationships based on mutual respect and shared goals.

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