Start Me Up: Financing the New Nonprofit

Propel Nonprofits (formerly Nonprofits Assistance Fund and MAP for Nonprofits) regularly gets inquiries from nascent nonprofits seeking help in getting their first round of funding to begin their work. Some come to us because they believe our name means we can give them a grant (we can’t) or that we can help them with a loan (for an organization without a financial history, we can’t).

Here are some sound ways to begin bringing in money and other resources, such as volunteer time and gifts-in-kind.

1. Start with a budget.  Your budget communicates your plans and tells prospective donors and funders how realistic you are in your work.  A start-up budget is likely to be very modest with minimal staff and facilities. This checklist can help you begin, but keep in mind your first year expenses may need to be very limited to show you understand how to start from the beginning and not take short-cuts. If you have a reasonable plan, supporters are more likely to bring dollars to the table than if you only have good intentions without a roadmap.
2. Your founding donors probably know you.  Covering the first few expenses (even filing the IRS form costs money) has to come from somewhere. People who already know and trust you will be your strongest supporters. Have a party to explain your mission to friends and family, and ask them to help cover the initial costs. Nonprofit founders often stand alone for too long, and paying all the expenses out-of- pocket can cause a lot of stress early on.
3. Think small. Many nonprofits want to request a large grant right away. The big request is much more likely to be successful if you can show a track record at little achievements. There are many local businesses, houses of worship, and community groups which could afford $100-$500 donations if they see a budget and some initial investment from a start-up organization (see 1 and 2 above).
4. Be wary of debt. A loan or a credit card advance can seem like a good way to get the ball rolling, but often this start-up debt can hobble an organization for years to come. The money you get in earnings and donations in years 2 and 3 are going to be needed respectively. Spending income to pay off debt from the first year can significantly impact an organization’s financial situation down the road.
5. Plan long-term. That big foundation request mentioned in number 3? Don’t forget about it completely. Be ready to show how it becomes viable in year 2 or 3 for your new organization. Start looking at funding cycles, timelines, and begin meeting with philanthropic staff. This, along with proven results, will help you get that first application in on time and ready for approval.

Patience is not only a virtue; it is a key to becoming a thriving nonprofit. Take your time, spend within your means and then plan to grow. Since starting from scratch requires time, resources and money, we emphasize how important it is to plan and budget accordingly. Every mighty oak must start as an acorn. If you are expecting something different, make sure you weigh all of your options.