Don’t Believe Everything You Hear: Dispelling Non-Profit Funding Myths. Here are three common myths I’ve encountered during my career as a professional grant writer.

This guest blog post was written by Kristin Olson, a Grant Writing Specialist at Grants Galore.

Operating a non-profit organization is challenging enough without getting distracted by misinformation.  Here are three common non-profit funding myths I’ve encountered during my career as a professional grant writer.

Myth 1:  Grants are free money.

Truth:  Just because you don’t have to repay a grant like you have to repay a loan doesn’t mean the grant is free.  One of the most common expenses associated with administering a grant is the time involved with submitting reports to the funder.  Some grantmakers require only a year-end report. 

On the other hand, some grantmakers—especially government funders—require quarterly program and fiscal reports as well as a year-end report.   Before you sign the grant agreement, make sure you understand the funder’s expectations.  Other expenses may include completing a formal fiscal audit, attending mandatory orientation meetings or trainings, and hiring an independent evaluator.

Myth 2:  We should apply for grants as soon as we get our 501(c)(3).

Truth:  I’ll start with a disclaimer.  Grant funding is available to start-up non-profits in the form of seed money, support for capacity-building efforts, program development, among others.  However, in my experience, the vast majority of funders prefer to award grants to organizations that have been in operation a minimum of one year.  In addition, funders often require audited financial statements.  I recommend that you use that first year to position your non-profit for success:

  • Stay focused on your mission
  • Educate yourself about the grant world
  • Consider multiple funding streams
  • Improve your organizational capacity
  • Invest time in program planning & budget development
  • Gather local data and testimonials that demonstrate your impact

Myth 3:  My organization is exempt from sales tax, so we’re eligible to apply for grants.

Truth:  Sales tax exemption is different from income tax exemption.  Almost all private grantmakers, such as foundations and corporations, require their grant recipients to provide evidence of their 501(c)(3) designation by the Internal Revenue Service.  This designation indicates that the organization is a charitable non-profit entity that is exempt from paying income tax. 

A 501(c)(3) designation also means that anyone who provides financial support, either through a grant or personal contribution, may claim the gift as a charitable deduction on their income tax return.  Sales tax exemption is granted by the state in which the non-profit organization is incorporated, whether it is officially recognized as a charitable entity or not.  Although some private-sector grantmakers accept grant proposals from non-501(c)(3) organizations, it’s not common.

Despite the myths, grant funding is an important component of a diverse funding plan for non-profit organizations.  I encourage you to ask questions so that you can avoid some common pitfalls and make informed decisions about when and where to apply for grants.

About the author:

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Kristin Olson is a Grant Writing Specialist at www.GrantsGalore.net. You can find her on LinkedIn here.

 

 

Don’t Believe Everything You Hear: Dispelling Non-Profit Funding Myths
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