What Sources of Capital Are Available to Non Profit Organizations?
Nonprofit organizations have a variety of options for raising capital to support their organization and its aims. Among those are direct appeals, grants, special fundraising events, major gifts and endowments. Categories of fundraising may overlap or fit under a single umbrella, such as in a capital campaign that involves a multifaceted approach to raising capital.
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Direct Appeals
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One frequent source of capital for nonprofit organizations is mass direct appeals to potential donors. These appeals may come in the form of postal mail, e-mail, phone calls or some other of communication sent directly to potential donors with simple requests for contributions. The contributions sometimes come with an incentive for the donors. The direct appeal might be tied to a special time of the year. Sometimes nonprofit organizations hire professional firms to manage the appeals in exchange for a percentage of the donations.
Grants
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Grants are one form of capital funds raising that can be difficult and time-consuming. Nonprofit organizations have access to a wide range of grant sources, including public and private sources, but the process for securing the grants requires a great deal of care and the pursuit of grants tends to be highly competitive. In addition, the Foundation Group, which works with nonprofits, reports that grant funding is an unreliable foundation for raising capital and should not overshadow other efforts.
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Special events
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Most nonprofit organizations use special events to raise capital. Examples of special events include concerts, auctions, sales, contests and sporting events, such as races or tournaments. In the case of special events, some of the money raised through the event typically will need to go to fund the staging of the event and additional funds raised can be added to the nonprofit's coffers. Special events also serve a branding role, getting a nonprofit's name in front of people and attracting potential donors to a cause.
Endowments
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Many nonprofit organizations lean on endowments for support. Endowments can provide a steady, reliable source of funding. An endowment is a gift of a financial asset to the organization. Often, the endowment is an investment fund that can provide annual income through dividends for the nonprofit to use, while the principal is left untouched or spent in a way that is directed by the donor. Endowments typically have a designated purpose.
Major gifts
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Major gifts are large, one-time donations that nonprofit organizations typically solicit from donors through extended contact. Organizations target potential major gift donors and give them special attention. Givers of major gifts tend to be already involved in the organization, a past donor or strong believers on the nonprofit organization's cause. Most of an organization's income typically originates with its largest donors, and major gifts are a primary source of that income.
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