How to Get Funding for Your Nonprofit

Author: Kody Wirth

Kody Wirth

Kody Wirth

5 min. read

Updated January 4, 2024

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.

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.

1. Create a nonprofit business plan

While a nonprofit business plan isn’t all that different from a traditional plan—there are unique considerations around fundraising, partnerships, and promotions that must be made.

Dig Deeper: How to write a business plan for a nonprofit

2. Explore nonprofit funding sources

Review what funding options and potential revenue streams are available to you. Look for a healthy mix that will help you maintain a steady stream of cash flow and won’t leave you overly reliant on a single source.

Dig Deeper: Common nonprofit funding options

3. Determine how you will raise funds

Knowing where you want to get funding from isn’t enough. You need to have ideas for how you will promote, connect, and ultimately win that funding. One common option is to hold a fundraising event like a dinner or gala.

But don’t be afraid to think outside the box and host a fundraising event that better fits your audience.

Dig Deeper: 6 unique nonprofit funraising ideas to try

4. Confirm that donors align with your mission

Nonprofits are driven by a mission. In order to succeed you need everyone involved to be aligned with that mission—especially if they are putting money behind it.

Dig Deeper: How to find the right nonprofit donors

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.

Content Author: Kody Wirth

Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.