Vector of a hand reaching out with a heart floating above it. Represents getting funding for a nonprofit business.

How to Get Funding for Your Nonprofit

Unlike for-profit businesses, a nonprofit’s sole purpose is to drive change that impacts our society, environment, and future in meaningful ways. And since the focus is not specifically on generating revenue—nonprofits typically require funding through donations or grants to stay operational. 

In order to raise funding, you need to run your nonprofit like a business. You need to understand how you’ll use the funding you raise and position your organization to attract and convince potential donors that you’re worth investing in. But where do you start?

In this guide, we’ll examine the importance of fundraising, how to secure funding from a variety of sources, and how to review and report on its use. Let’s get your nonprofit on the path toward sustainability and ideally even growth.

What is nonprofit funding?

Nonprofit funding refers to the financial resources nonprofits use to operate and pursue their mission-oriented goals. These come from a variety of sources, including government grants, individual or corporate donations, business sponsorships, fundraising events, and sales of goods or services.

It’s important for nonprofits to diversify their funding sources. Relying too heavily on one type of funding may leave them vulnerable to changes in economic conditions or policy. Regularly revisiting and updating their funding strategies on at least an annual basis is necessary to remain sustainable. 

This could mean seeking new grant opportunities, building relationships with potential donors, planning new fundraising events, or pursuing additional ways to generate income from the organization’s mission-aligned assets or services.

How to fund your nonprofit

Raising money for your nonprofit is not all that different from a for-profit business. While some of the funding opportunities and processes are unique—you still need to plan, apply, and report like every other business in order to get the most out of your funding.

Why fundraising is important for nonprofits

For-profit businesses often view raising funds as a stepping stone to start or grow a business. For nonprofits, fundraising serves a far greater and more consistent purpose. In short, without additional funding, many nonprofits would be unable to stay open. Here are a few reasons why:

Fuels mission-driven work

Fundraising directly contributes to a nonprofit’s ability to deliver on its mission, be it by providing educational resources, aiding in environmental conservation, or supporting health initiatives. While ideally, a nonprofit has multiple sources of revenue coming in, external funding or grants typically make up the bulk of their cash flow.

Enhances organizational sustainability

By raising funds, nonprofits build a financial cushion that helps them weather changes in the economic landscape or cover unexpected costs. It enhances the organization’s financial sustainability, allowing it to continue serving its cause even in challenging times.

Promotes community engagement

Fundraising isn’t just about money, it’s also about engaging the community. When individuals donate to a nonprofit, they’re not just giving funds—they’re participating in the organization’s mission. This fosters a sense of unity and increases the organization’s impact.

Helps attract and retain talent

A nonprofit’s team is integral to its success. Fundraising enables nonprofits to attract and retain dedicated, talented individuals who can propel the organization toward its goals. It supports fair compensation, training, and growth opportunities, contributing to a more motivated and effective team.

Facilitates growth and expansion

With adequate funding, nonprofits have the means to grow and expand. They can scale their programs, reach more individuals, and make a greater impact. Fundraising, therefore, is not just about maintaining current operations, but also about forging the path to future growth.

How to report revenue from nonprofit funding sources

Reporting revenue from nonprofit sources is a fundamental aspect of maintaining transparency and accountability within an organization. These reports typically itemize funds from different sources such as individual donations, corporate sponsorships, grants, and earned income from services or goods.

You’ll likely need to review this documentation with board members to ensure that the organization is on track financially and that funds are being allocated in alignment with your business plan. These reviews can be done quarterly, bi-annually, or annually, depending on the board’s preference and the organization’s needs. You may also be required to share this information with individual donors in some capacity.

To aid in these reporting and review processes, consider investing in financial forecasting tools or software. These resources can provide a detailed analysis of the organization’s financial health, future trends, and potential risks, supporting informed decision-making for both short-term operations and long-term strategic planning. This way, your nonprofit can remain financially sustainable while maximizing its impact.

You can check out our funding management guide for additional resources.

Nonprofit funding templates and tools

Free resources to help you prepare your nonprofit for funding.

Nonprofit funding FAQ

The largest source of revenue for nonprofits are donations from individuals, organizations, or other entities.

Starting a nonprofit involves several key steps: defining your mission, assembling a board of directors, creating a business plan, filing for incorporation in your state, and applying for tax-exempt status with the IRS. While it's a process that requires careful planning and can't be rushed, working with experienced professionals or consultants can help speed up the process.

The most common grants are typically government grants, which can be federal, state, local, or sector-specific grants. These vary widely in their focus, application processes, and amounts awarded.

Major sources of funding for nonprofits include individual donations, corporate donations, foundation grants, government grants, and earned income from sales or services. Fundraising events and bequests (gifts left in wills) also contribute to nonprofit funding.

For-profit funding typically refers to money raised from private investors, taking out a loan, or capital raised through the sales of goods and services that is reinvested back into the business. Nonprofit funding, on the other hand, comes from a variety of sources like donations, grants, and fundraising events, and is reinvested into the organization to further its mission.