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Disadvantages of Relying On Grants for Your Non-Profit

Many non-profits consider grants as their Holy Grail. Often times, organizations new to the industry seem to have an exaggerated view of what grants can do for them. They may believe that grants can help them kick off, help them meet their next month’s bill or save them from closing down. In reality, grants can often become a source of frustration and stress for a non-profit.

Grants Cannot Help You Start Off

Usually, most foundations, be it government or private agencies, only offer grants to established non-profits. Most of the time, founders of charities use their own capital to get off the ground and rely on private donors to fund them. Sometimes, a bank may approve a non-profit’s appeal for a loan; however, it mostly comes with collateral or guarantee of payback and the non-profit needs to have an exceptional sustainability plan.

Therefore, if you are a startup, grants are not something you should rely on to kick-start your company.

Grants Come with a Lot of Strings Attached

Some non-profits labor under the misconception that once they receive a grant, they can spend it on whatever they want. The reality is far from this.

One of the biggest disadvantages of grants is that its purpose is very narrow-focused. Most organization only consider giving grants if the non-profit’s mission aligns with their beliefs, values and opinions. The grants come with several term and conditions and are only meant to be spent on certain projects or a particular problem and not on the non-profit’s interests, as a whole. The grant foundations ensure compliance by asking about the progress of the project for which the grant has been extended and tracking funds.

Grants Take a Long Time to be Approved

A grant is not easily or quickly given. Applying for a grant involves a lot of labor and reporting. Although grants from private organizations and less complex than government grants, both of them still require energy, resources and time to submit an application. It takes time to develop an application that can win grants and it takes even longer for it to be accepted and for the non-profit to benefit from the funds. Many organizations hire writers with grant application writing experience to aid in the process.

Grants Have Complex Reporting Requirements

The complicated grant requirements are one of the common complaints of non-profits. Grants, especially those that involve federal funds, require a comprehensive examination of the proposal, and involve data tracking and submission. There is a lot of paperwork in this process as well as the involvement of human resource. Since federal grants come from taxpayer money, making sure the money is put to good use is extremely important.

Grants are Short-Termed

Grants are a “soft” option for fundraising because they are not sustainable and cannot be relied on for long periods of time. Once a grant is given and it is spent by the non-profit, it may not be possible to get another grant from the same agency again. Therefore, it is important that as a non-profit, you have more sustainable and long-lasting sources of income that does not depend on grant money.

Grants are very appealing and have benefits too, including they do not need to be repaid. However, you need to put some thought before you apply for them. A good fund generating portfolio should have various forms of charity givings and donations that can be renewed. Grants should occupy the lowest percentage of your income source portfolio.

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