"We initially wanted to help grantees with the basics of operations and organizational development, especially fund-raising, but we found that the challenge wasn’t just in filling gaps in areas like donor management software or budgeting — it was personnel, skills, and capacity. We realized we needed to invest in staff, not just in tools and processes."

-Marianne Philbin, Executive Director, Pierce Family Foundation-

Tutorial 2: Ten Approaches for Funding a Nonprofit

1. Program Funding:

This type of funding is given to cover the costs of running programs, which is the most common form of support that nonprofits receive. It is often presumed that there is enough money provided within program funding to cover other expenses such as salaries, operational costs, and capacity support.

2. Capacity Support:

This type of funding is most often given to nonprofits to help them grow and strengthen their abilities to accomplish their missions. Such grants or donations are frequently used for training or hiring staff (e.g., for fundraising), leadership development, research and development, monitoring and evaluations, strategic planning, and upgrading technologies. Some foundations couple providing financial and human resources together, such as by providing funding and offering free consultative services.

3. Operational Support:

This type of funding is used to cover the cost of running a nonprofit, including everything from purchasing supplies to paying for utilities. Providing sufficient operational support enables staffers to focus significantly greater percentages of time on their mission rather than on making sure their bills are paid.

4. Talent Investing:

This is a form of capacity-building support given to nurture talent, particularly leadership development. Examples include coaching, training, education, peer learning, networking opportunities, and career development. Ideally, talent investing significantly increases skills and talents while greatly diminishing costs associated with hiring new employees – a burden many nonprofits experience.

5. Making Loans:

As an example, a financially savvy philanthropist might take over a bank’s mortgage of a nonprofit, provide a significantly lower interest rate or no interest rate at all. This can be substantially helpful for nonprofits considering that real estate payments are often the second-highest budget item (after payroll). Some supporters of a charity might provide the organization with gap loans. As an example, a person or foundation might lend money to cover the time prior to when a nonprofits expects a grant payment from the government.

6. Unrestricted Funding:

This type of funding is most often welcomed and least available for nonprofits. Providing organizations with unrestricted funding gives them the flexibility to use a funder’s money as needed. Unless specified, charitable giving is considered unrestricted. For better or worse, most institutional donors specify how their grants are to be used.

7. Restricted Funding:

This type of funding is based on specified restrictions. Quite often donors will specify the program they want their money to support, which is program funding as listed above. In some cases, a donor may specify that the money be used as an endowment, to be held as reserves, or for a wide range of purposes. Restricted funds can also have specified dates when portions of the gift can be converted into unrestricted gifts.

8. Nonprofit Investing:

Some nonprofits offer private investment opportunities to investors to grow its business similarly to how one might invest in a for-profit business. There are also many instances when someone will invest in a socially profitable for-profit business. Blended returns is a common term for enabling good while seeking a financial benefit. Other common terms include impact investing, social investing, socially responsible investing, mission-related investing, and program-related investing.

9. Inheritance or Legacy Gifts:

Through a number of instruments, donors designate assets to be given to a nonprofit during or after their lifetime. This is a complex process that should involve professional legal and financial advisors. This kind of giving might involve real estate, life insurance, stocks, bonds, or other.

10. Capital Gifts:

As stated on Google by Anderson v.: “It is an investment in a facility, now and for the future.” An example would be a donation to build an additional wing for a hospital.

Included within the some of the approaches listed above, nonprofits deeply appreciate multi-year funding commitments. Making these commitments helps staff know how much money is available, which is very helpful when trying to accurately make future plans.

Proceed to Tutorial 3

  • Introduction

    Welcome to this series of mini courses. We hope to give individual donors a quick lay-of-the-land

  • Ten Approaches for Funding a Nonprofit

    1. Program Funding: This type of funding is given to cover the costs of running programs, which

  • Donor's Perspectives on nonprofit capacity building

    Many leaders in philanthropy support organizations (PSOs) believe that nonprofits could achieve a considerably greater impact

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