Santa doesn't wear red, white and blue.

As those of you who follow this blog know, I get a lot of my column ideas from questions people are asking in emails, and there are a lot of questions about finding start-up capital. 

This past week, there's been a new twist on an old question.  The question is basically "can I get the government to fund my start-up".  Last week it was centered on Section 8(a) business development funding.

I would refer anyone looking for government grants for any kind of start up to the first sentence on the SBA website.

It reads: "SBA does NOT provide grants for starting and expanding a business."

It's hard to see how that could be any plainer, but apparently, some people think Section 8a funds are different.

First of all, this funding apparatus is for EXISTING businesses that have been in business at least three (3) years.

Second, the qualifications are not an "either-or" requirement. You must be BOTH socially and economically disadvantaged.

Third, this funding is for existing businesses that the government deems to be "small" businesses.

They make the determination, so what size you think your business might be is of no importance to them at all

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Although the SBA is business-centric, nonprofits will find that the "three-years-in-business" qualifier is pretty standard even in the philanthropic arena.

There are tried and true ways for new businesses and nonprofits to raise money, but sorry, grants aren't one of the ways.

Almost all new business funding is in the form of one-to-one investors or donors.  It might be from venture capital, where you give up a share of your business in exchange for funding, or from a few major donors or supporters, or from friends and family, but grants…no.

If you are interested in Section 8(a) funding and can meet the basic qualifications, then of course go for it.

Like all SBA or any other types of government funding, there are many hoops to jump through, but if you can qualify, then go for it. Just remember, true government grants are usually focused on the research and technology transfer fields, so be sure you fit into one of those areas before you spend any money or time to apply. 

Startup cash - networking for support

Search online for "nonprofit startup funding", and you'll get lots of results from well-known players in the field as well as articles from prestigious universities and publications.

The common thread is that you aren't going to access funding from one of the large foundations. In the beginning this is definitely a  DIY project.

Nearly all of these searches are going to emphasize you almost literally have to be a door-to-door salesperson.

Of course today that also means social networking, but regardless of how you do it you have to start with one-on-one contact. Checks don't write themselves.

One of the currently popular ways to raise capital is through some type of crowdfunding. It's relatively inexpensive to do, and some of the results are staggeringly successful.

What all of these campaigns have in common is viewer participation and that comes from awareness.

 

That means you have to do something to  generate interest.

 

That could mean latching onto a current news story. Remember the business owner in Ferguson MO whose business was trashed so badly she thought she might have to close for good? She got so many contributions from a GoFundMe campaign that she is going to be able to help other businesses that suffered after their businesses were trashed. That campaign leveraged the national media attention on the underlying issue.

Or maybe you have a few dozen followers on your Facebook page that already have an interest in what you do. You can ask them to tweet out a call for supporters interested in learning more about your cause.

Local papers are usually looking for community or local area news.  Find out who is bylining those stories and let them know you have some news for them. It helps if you already have a fundraising campaign in place.  Be sure you let the interviewer know how people can help.

If your nonprofit targets an area or problem that has already been in the news recently, be sure you let the reporter know.  After all, it could turn into a series of articles for them.

And of course there is your board of directors. Each one of them probably has a social media or community presence as well.

Attracting startup nonprofit cash is about building relationships. Relationships require connecting to someone. Check out these two messages.

Both use a picture of a little dog. One says "Local group wants to build no-kill animal shelter"  The other one says "Without your help, Fido will die on Friday".  Which one do you think people are going to click on?

If you need help designing a campaign or appeal for startup funding, drop me a line at rightwords@ida.net. It's what I do.

 ©2015 – Rebecca Lee Baisch  

Grant Reporting

Being awarded a grant is not the end of the line for your grant department.

Nearly all major grantors require some form of grant report or funding accountability statement.

Some are primarily narrative-based, while others require some form of  formal financial statement or utilize a grantor-provided spreadsheet in an Excel-based  format.

There is no one-size-fits-all template. Each grantor usually has their own preferred format.

If one is provided or guidelines given via a website or upon request, I like to download or obtain the information at the same time I research the grant application. That way I can be sure that any budget or information categories will correspond to the grantor requirements from the start. Occasionally the report also gives insight into what areas are of particular importance to the grantor.

In general, the larger the grant, the more complex the reporting becomes. Very large, collaborative or multi-year grants may require interim reports  at either quarterly, semi-annual or annual  intervals.

In addition to the obvious need to prove to your funding partners that you are spending the money as required by the terms of the grant, these reports also provide a snapshot in time of your progress for your Board of Directors.

In general, grant reports might require you to restate your organizations legal description, i.e. your EIN, address, responsible party or parties, date of determination and occasionally even a copy of your financial statements for the year immediately prior to and during the grant period. Some reports will require you to attest that you are still in good standing with the Internal Revenue Service.

If requested you will have to  include any identifying information for the grant, such as its CFDA number or grantor specific-identification (similar to a case number).

It is important that your report reflects alignment with the programs that were funded. If you submitted a line-item budget, the report should reference back to that budget. If the grantor placed restrictions on the amounts used for administrative or capital expenditures, they will want to see that you adhered to those restrictions.

In the case of very small grants from local agencies or private foundations, they may not require anything more than an acknowledgment that you actually received the funds. Still, it never hurts to include a short thank you letter or memo acknowledging the uses of and benefits received from the funding.

Can your nonprofit apply for grants?

To most of the public, the definition of a nonprofit or charity  is the one used to describe 501(c)(3) organizations. In other words, organizations that solicit and spend tax-exempt and  tax deductible funds "for the public good."

Actually there are several subsections of section 501, and how you file your initial paperwork can substantially change the funding landscape for you.

For some of the differences, check out this chart.

Lately, I have run into several organizations self-described as foundations and approved as 501(c)(4) entities that want to apply for grants from other foundations.

In most cases, I don't quite understand why they chose that subsection to file under, but that's a topic for another post.

If you are wondering "what's the difference, we are still a charity " then you might not understand why foundations reject your grant applications and donors don't support you.

 One major difference is that donations to a (c)4 are not tax deductible, and you are legally required to state that fact prominently on all your publications asking for support.

While tax deductibility in and of itself is not the major reason people donate, the lack of that component can lead casual donors to question whether their money will be used for charitable purposes or political lobbying.

As far as major foundation and corporate donors are concerned, the (c)4 can legally only access funds from other charitable organizations under certain well-defined conditions.

That means that (c)4's are far more dependent on developing their donor base one-on-one than their (c)3 counterparts, meaning that grants are usually not part of the fund-raising equation.

Fundraising for a (c)4 may involve more donor education to attract individual donors.

Particularly since the flap about the IRS targeting (c)4's for their political activities, donors need to be told why your foundation is problem-centered rather than politically centered, assuming of course that is the case.

Other types of fundraising that are typically more productive are things like black-tie events, one-on-one donor meetings, social media campaigns, website donation capability, direct mail, phone campaigns  and email solicitations.

You can combine events with a (c)3, as long as the donations are clearly separated. You can rent an email-list from (c)3's, but it must be rented at fair market value (typically .10 to .40 cents per name).

If your mission and that of a public charity are aligned in some way (for instance a research mission to find a cure for cancer could combine with a public charity seeking funds for respite care for cancer victim caretakers),  the (c)3 might welcome your participation.

A major donor cultivation program is essential to access larger lump-sum donations. Just be aware that currently donors are limited to a $13,000 a year limit.

It is absolutely essential that your board participate in fundraising efforts. Even more than usual, (c)4 fundraising is more about who you know than what you know.

Some (c)4's are spin-offs from(c)3's and vice versa. If your organization is having a lot of trouble fundraising, you might want to consider converting to or adding a (c)3, again assuming that your primary mission is not political.