Fundraising, grants, and membership fees are usually the key sources of income for a non-profit organization. If you need additional funds in addition to what your company will carry in through these networks, you will face a difficult climb.
Although it is not cheap, there are ways to fund your charitable organization even if you are unable to obtain a loan. A loan is also not at all out of question, especially for a more developed non-profit. The best form of funding for your company will be determined by a number of variables, which I will discuss in greater detail in the sections below.
Banks & Credit Unions
While it is much more difficult to apply for a loan from a conventional bank, some banks do provide loans to non-profits. Big companies, including banks, frequently like to flex their charitable muscles through non-profit grant or loan programs. That being said, due to the higher risk involved, banks will charge higher rate of interest to non-profits, and you would most likely need to have an existing non-profit with paperwork showing your income, expenditures, fundraising plans, and other financial details.
It is essential to submit for financing only to banks and credit unions that expressly indicate that they partner with non-profits and have a funding program for non-profits. These organizations will be more likely to approve your application because they will be more familiar with your needs as a charity. This type of funding is ideal for financial services for schools.
Crowdfunding may be a good choice for start-up charitable organizations that are unlikely to apply for bank loans. There are many forms of crowdfunding, but charitable/donation loaning is best suited to charity organizations. Based on the crowdfunding site you use; you might be able to receive free capital for your non-profit in the form of non-online donations. Alternatively, you could be eligible for a no-interest crowdfunded loan, in which case you will only have to repay the principal.
It is essential that you become acquainted with the laws governing non-profit fundraising in the state or states in that you will be working. Before you begin soliciting contributions, you will need to register your charity non-profit with the state.
Another type of funding that charities can be eligible for is business grants. Non-profit grant money may belong to the government, business groups, companies, or other non-profit groups. Grant money is generally intended for very specific reasons, and government grants, in particular, necessitate a thorough screening and selection process.
They will also want to see what you have accomplished with your non-profit so far. Most non-government grants are for smaller sums (less than $50,000) and can look like a contest or competition in which you compete against other organizations.
Community Development Financial Institutions
A CDFI, which stands for “Economic Development Financial Institution,” is a financial institution with the goal of facilitating community growth by offering financial support to low-income or distressed enterprises and customers. CDFIs are usually non-profit or for-profit entities, but they may also be conventional banks/credit unions or wealthy investors. They typically do not function on a global level, so you will need to look for CDFI opportunities in your region.