As you are building your nonprofit, most nonprofits early on come to understand that they must increase their funding so they can serve more people, serve the community, and do all the things that they got into this industry to do. As you are building revenue sources, you need to focus on diversifying funding sources.
There are three main types of grants.
- Federal grants that come from the federal government.
- State and local government grants that come from your state and local governments.
- Private foundation grants that come from private foundations.
Private foundations are operated outside of the government, and so private foundation funding is my favorite kind of funding to recommend for most of the nonprofits that I talk to.
Federal grant funding: More competitive, not flexible
It is true that the federal government does give hundreds of millions of dollars in grants every single year, and it is a large source of funding for organizations in America. However, federal grant funding is very hard to get. It is very competitive, and once you get it, it has many strings attached that make it not a good option for some organizations.
Federal grants are:
Competitive
In a typical federal grant competition, they may make ten to fifteen awards across the whole country, and there are large organizations that are industry leaders applying for these grants. This makes the awards very competitive.
Complicated
Federal grant applications are also very complicated to complete, compile, and submit. Most federal grant applications are more than 100 pages long with attachments, and they require a significant amount of time to develop.
Strict
They are very strict about how you use the money. For example, a federal grant will say, “We want somebody to do X, Y, and Z.” In your application, you have to tell them you are going to do each of those three things. If the grant is awarded, you have to do those three things with the money, and you have to measure and report on doing those three things. If your work does not encompass X, Y, and Z, then you will not get funded. Because of this, federal grant funding is not very flexible.
Difficult to Administer
If you get the federal grant award, they can be hard to administer on the back end, so you have to have significant infrastructure within your organization to track funds and track outcomes to be able to meet the requirements of the grant. For many federal grants, the organization will hire a person whose sole job is to manage that grant, and that is all they do since it takes so much work.
Swayed by Administration Priorities
Additionally, federal funding is strongly influenced by each administration. This means that there is a lot of fluctuation year over year as to what is being funded and how the funding is dispersed. While some federal grants are repeated annually, more often a federal grant will come out just one time. So if you get a federal grant to support a new program, you will need to find other funding sources before the federal funding runs out to ensure the program can continue to operate.
Perfect for the Right Organization doing the Right Kind of Work at the Right Time
Typically, the federal government opens grant opportunities each year for housing, health, education, and more. Typically, over a hundred opportunities come open each week. While these statements have not been true of the 2025 calendar year through February, this has been the case for decades, and will likely be the case again.
When an opportunity comes open that fits the mission of an organization who is ready to do the work described by the RFP, this can be an amazing opportunity for a nonprofit to apply, receive funding, and launch or expand their programming. I have seen federal grant funding transform nonprofits, and I am proud to have been a part of preparing grants in the last year that won our clients millions of dollars in federal funding.
But this right organization, right work, right time situation means that a hopeful nonprofit must search for open federal grants daily so that they don’t miss their chance. If an opportunity comes open, and the nonprofit doesn’t know about it and can’t apply in time, the RFP will likely never open again, and this funding opportunity has been lost. This is the kind of stuff that used to keep me up at night worrying that I had missed an opportunity while I was sick or on vacation.
Private foundation funding: More stable, very flexible
For most nonprofits that I work with, I recommend private foundation funding. Private foundation funding is a better option for many organizations for a few reasons.
Private foundation grants are:
Quick
First of all, private foundation grants have a much quicker turnaround on when you’re going to find out if you’ve got the funding or not. For a federal grant, you are often applying for funding this year that will be coming to you next year. For private foundation grants, you can usually hear back if you’re going to get the funding in two to six months. This is the industry average for private foundation grants.
Flexible
Foundation grant funding is also usually much more flexible in the type of funding that they offer. With a federal grant, the RFP outlines each approved use of the money, and these tend to have a laser-like focus. For example, a federal grant released last year was to support taking historically important newspapers published between 1690 and 1963 and digitizing them. Private foundation grants are typically targeted at broader goals like education, animals, or veterans. Within these goals, you can lay out how your program supports their initiative, but with your own unique services and work.
Easier to Administer
Private foundation funders are also typically more flexible in how the evaluate grant funding. In the foundation grant proposal, you will be able to tell them how you measure success and what markers you are reaching for. You will then have to report within a year about your work and how funding was used. This makes foundation grants much easier to administer, both financially and reporting wise. Foundation grants typically don’t require organizations to hire additional staff just to manage them.
More Stable Year Over Year
Foundation giving is governed by the individuals running the foundation or by the original documents forming the foundation. Much of foundation giving is tied to the legacy left by the namesake of the foundation. These factors mean that year over year, foundations tend to prioritize the same giving categories. This means that if you develop a relationship with a foundation, this can provide you funding each year as you continue to do impactful work in your community.
Conclusion
If you are seeking to grow grant funding, private foundation grants could be a great way to direct your efforts. With fewer federal grant opportunities being released at the beginning of 2025, other nonprofits will also be looking to shift their efforts toward foundation funding. This will make finding the right partner even more critical this year.
If you are ready to get started with a solid grant strategy today that can increase funding for your important work, let me know. You can schedule a no-obligation consultation call with a member of our team.
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