Just like when starting a business, nonprofits also have starting costs in the startup phase. Of course, these costs will differ depending on what your nonprofit will be doing as some will require more than others to start. Unlike starting a business, however, you can actually start up your own nonprofit without your own funds.
There are many ways to obtain funding to start your nonprofit, and yes, these methods are legal. Just remember you will still have rules to follow. Let’s go over some ways that you can raise funds for your nonprofit startup without having your own funds.
How To Get Funding For A Nonprofit
Luckily there are many ways to get funding for your nonprofit startup. The first of these is one of the more obvious: a loan. However, this is probably going to be the least desirable and even the most difficult method. A 501c3 nonprofit organization can obtain what is called a 501c3 loan, but these typically are obtained by nonprofits that are already established. A nonprofit startup is not likely to obtain approval for much, if any at all. You can, however, get a personal loan to obtain funds to start your nonprofit.
You can also search for startup funds through local sources. Just like an already established organization, you can ask for donations from private donors or even businesses that would like to support your cause. Make sure to utilize these funds accordingly, however. You definitely do not want to come under investigation for misappropriating funds.
One great way to obtain funding for your nonprofit startup without any of your own money is through a fiscal sponsorship. Another organization, also a nonprofit, will “sponsor” your startup much like an investor might with the startup of a business. Your fiscal sponsor will handle a lot of the administrative capacities for you in the beginning. You can still do things like fundraising and getting donations. These donations will technically go to your fiscal sponsor with a notation that it should be designated for your project or nonprofit. Your sponsor will, of course, take a small percentage of these donations to cover administrative costs.
Another way to obtain funding is by applying for and receiving grants from other foundations, which is a type of 501c3 nonprofit. One of the best parts about receiving these is that grants, unlike loans, do not require repayment. In other words, grants are basically a gift to your organization. Of course, the money received from grants will likely come with conditions that you have to meet. For example, if you were starting a nonprofit animal shelter and you received a grant for the construction of the shelter, you would definitely be expected to put the money for the grant towards that construction. Grants can be given by the government, too.
Can You Raise Funds Before Being Incorporated?
A misconception that some may have while working on forming their nonprofit is the ability to receive funds prior to incorporation and receiving your 501c3 tax exemption status. It is, however, much more difficult. Obtaining startup funds from other organizations will be difficult since, much like a bank, these organizations want to see your tax exempt status and some record of fiscal responsibility.
Technically, you can still raise funds prior to being incorporated. The rules on this will vary by State and these rules can usually be found on the State Attorney General Office website. Keep in mind that should you try to obtain any donations prior to your tax exemption status, it is good practice to notify these donors. This is especially important because any donations you receive prior to obtaining tax exemption status are not tax-deductible for the donor. A donor can only deduct their charitable donation towards a nonprofit organization that has a current 501c3 tax exemption status.
Nonprofit Startup Services In Fort Worth
There are a lot of rules and regulations governing a nonprofit startup and its ongoing activities. Even though you could read up on it yourself, it can be incredibly difficult to understand everything. For the best nonprofit startup services in Fort Worth, Texas, contact Nonprofit Elite today. We have a 100% IRS approval rate for tax exemption and offer a variety of nonprofit startup services.
Leave A Comment