It is a common misconception that the whole reason a startup nonprofit goes to the trouble and expense of getting their 501c3 (tax-exempt nonprofit) status from the IRS is so they can go out for grants. And that once they receive their IRS determination letter, they are completely eligible to be awarded grants — all grants, any grants.
How do I know this?
Because as a grant consultant, I got the calls. Before the ink was even dry on their letter from the IRS, brand-new nonprofits would call me up, announce to me that they had their 501c3, and are ready for their grants now.
It’s a myth that I have had to dispel more times than I care to think about. For some reason, there’s this mistaken belief that having the 501c3 status entitles a nonprofit to grant money.
Who is propagating this rumor? How are start-up nonprofits coming to this conclusion?
I have disappointed far too many young hopefuls and spent far too many hours on the phone trying to explain to them and convince them that there’s WAY more to winning grants than a letter from the IRS.
Are you one of those new nonprofits?
Or are you about to apply for your new nonprofit’s tax-exempt status?
If so, I implore you: take the Grant Readiness Assessment on the Unlock-Grants website and take what it’s telling you seriously. Because it’s an amalgamation of multiple other assessments elsewhere on the internet, from trusted sources, and taking it is an education in itself. The Assessment is a reality check.
A Grant Readiness Assessment is your gauge of how set you are to 1) prepare for and submit a strong grant proposal, and 2) manage a grant if you are awarded. It’s not a one-and-done; it’s not just for new or start-up nonprofits. It’s a checklist that should be referred to and updated regularly by a nonprofit over the course of its existence.
Unlock-Grants will score your Assessment free and provide free “leveling-up” videos depending on your score. But even if you don’t get yours scored (a pdf version is also available), just reading through the list of requirements to be ready for grants is eye-opening.
Why all this fuss about Grant Readiness?
Grant Readiness implies not only a readiness to submit a grant proposal. It also implies a readiness to manage a grant award.
Just like we all daydream about winning the lottery, the start-up nonprofit probably also dreams about that big federal grant they’d win.
Working up to that point — where you go out for a beg federal grants and are awarded — means you are asking the federal government to trust you with the grant award money. It means that you have convinced them that your nonprofit has the fiscal controls in place to keep the grant award money separate, and account for the fact that you have spent it on just what you’ve said you’d do in your grant proposal, AND what they allow you to spend it on (those two factors may be different, read the fine print).
AND the feds will also put their own fiscal controls in place when they only release funds when you turn in receipts. Meaning, you need to be able to pay for what you spend upfront. It’s called a “reimbursement” grant.
So that million-dollar grant you dreamt of? You need to come up with that cool mil yourself, and then wait for the feds to cut you a check. That dream could fast become a nightmare.
The feds are making these reimbursement grants more and more common as an oversight measure. Can your nonprofit handle that? And can you blame the feds for handing over the cashflow prob to you? They’ve probably been burned too many times before by nonprofits that would “take the money and run.” It’s not a good reputation to have.
Grants are a big deal.
So, as you can see from the extensiveness of the Grant Readiness Assessment, grants are a big deal. Probably a bigger deal than what you originally thought. They require time, work, and attention. Foundations don’t give to people, PEOPLE give to people, so you have to treat those foundations accordingly, and not like ATMs.
Relationships need to be established, nurtured, cultivated, and stewarded. That takes time. And relationship-building can’t be outsourced. Consultants can’t make your friends for you, that’s work YOU have to do.
Grants also require an investment of another resource: cash. Grant professionals are just that: professionals. They don’t work for free; this is their livelihood. If you can find someone to work on your grants pro bono, that’s wonderful. But grant pros are usually far too busy with their paying work from nonprofits (1.48 million 501c3’s in the U.S. in 2022, according to the IRS).
The new nonprofits would call me up and ask how much do I charge to go out for grants? And if I was getting those calls, you KNOW my consultant colleagues were getting them too.
So being Grant Ready also means being able to afford a proper grant pro to help get you Grant Ready and submit a strong proposal, so you have a better than even shot at a grant award. It’s more than a question of picking someone who takes good notes and knows how to fill out forms. It’s a matter of finding someone who can position you as the strongest candidate for limited grant dollars. Not by fudging the truth, but by working interdepartmentally to strengthen your agency, its programs, and its reputation in the eyes of funders.
That’s a tall order.
How to start
Start by taking the Unlock-Grants’ Grant Readiness Assessment and finding out your score (free). Watch the accompanying videos (also free). Look hard at your Readiness areas that need attention and make strides to build and strengthen your nonprofit in the eyes of funders.
It’s a Long Game, that starts with the first step.
