4 Ways to Future-Proof Your Nonprofit's Funding

Thomas Boyd, ICG Specialist Consultant - September 12, 2024

There is never a “bad time” to review your organization’s development strategies, but this might be the best time. The U.S. Presidential election will bring about changes in funding priorities and procedures, driven by a new Administration and a new Congress, no matter who wins.

The November 2024 election will affect the composition and character of the Congress (435 House seats, 33 seats in the U.S. Senate) and this will likely cause some volatility in patterns and practices of Federal funding. There will also be changes in administrative personnel and those changes will likely result in some bottlenecks and delays.

Board, staff and development advisors should consider this moment as an invitation to consider alternatives to government funding, even if your programs have traditionally been supported by a “reliable” agency. 

ICG encourages regular strategic planning for development, and in this two-part series, we will outline some of the other ways savvy nonprofits support their important work. Not all of these approaches will work for all organizations, but some of them might make sense for your nonprofit to consider.

Consider the Corporate Sector

Big business is - big. The value of nonfarm, non-financial businesses in the U.S. tops $55 trillion. Many companies make grants, and charitable giving by U.S. corporations topped $36 billion in 2023. This is generally under the umbrella of a company’s corporate social policy (CSR) program. There’s usually less rigor in the application process than with government grants, and often a quicker decision by the funder. 

On the other hand, corporate grantmaking is often tied to the business interests or geographic location of the company making the grants. And some companies might not be appropriate targets for some nonprofits (e.g. a peace activist organization would probably not apply to a defense contractor). 

This is a good time to investigate corporate giving, but another resource from the corporate sector is the $515 billion spent on marketing and advertising. Does your organization offer opportunities for corporate sponsorships? These might include underwriting an annual event, a named program or part of your facility, product sales, co-branding and point-of-sale donation campaigns.  A business might provide funding to put its logo on your materials for a big public event, or become the lead donor in a capital campaign (with the company’s name out front at the top of the list), and for many organizations that have public-facing media (e.g. websites and programs at events), corporate advertising might be a source of revenue.

Another resource from the corporate sector is giving by employees and their employers. Forbes says 92 percent of “multi-billion-dollar companies” offer a matching-gift program. If your organization receives donations from individuals, or uses volunteers, look into the potential for generating lots of additional support from companies where they work.

Major Giving by Individual Donors

Nonprofits should know that the lion’s share of charitable support comes from individuals – more than 60 percent of total giving. Even moderate-income households make donations, about $2,880 for households below $50,000. A nonprofit organization can build a base of reliable income from a steady stream of small contributions from a large pool of people.

But many nonprofits identify small donors who have the capacity to make much larger gifts. Major giving is worth exploring when there are donors who have  a long history with supporting the organization. It might be timely when the nonprofit has a big project in the future,  or faces a significant challenge that deserves big support. It’s also important to establish mechanisms for recognizing and honoring major donors.

Earned Income

Nonprofit doesn’t have to mean “non-business.” Your organization might consider things that you can sell and earn income to supplement and strengthen the annual budget. What things? Branded items and merchandise, rental income from the use of a facility, maybe licensing a technology or curriculum, consulting and training, revenue from a proprietary database, perhaps fee for services. A cautionary note: be sure the revenue-producing activity doesn’t eclipse the tax-exempt charitable purposes for which the nonprofit was created.

Program and Mission-Related Investments

A relatively small number of foundations use their money to make loans to nonprofits, using  vehicles called “program-related” or “mission-related” investments. These are low-interest loans, often well below market rate, and generally have much longer repayment timelines than typical commercial loans.  If your organization is involved with housing or community development, preservation, habitat protection, or if you face a fiscal crisis brought about by slow payment of grants funds, it might be worthwhile to explore PRIs. These are more complex financial relationships than a straightforward grant, and almost always grow out of a longstanding connection between a funder and a nonprofit.

Coming soon, Part Two of this blog series about funding alternatives. We’ll look at the annual fund, foundation grants, state and local funding, collaborations, and special events. And we’ll wrap up Part Two with some suggestions for how nonprofits can use these alternatives in strategic ways. We’ll offer tips about finding – and implementing – the most appropriate funding pathways for your organization.