While organizations without 501c3 status can’t apply for grants, there are still ways to legally accept donations, fund their business, and serve the community. Donors may not be able to write off their tax contributions, but a compelling cause can attract support. In this article, we’ll share six ways nonprofits without 501c3 status can raise funds.
There are many reasons why people donate to causes and refrain from starting their own nonprofit: it’s time-consuming, it requires undivided attention, and often feels like a big question mark. Even if an organization isn’t formally recognized as a 501(c)(3), there are still strategies for funding a cause you’re passionate about.
While non-501(c)(3)s cannot apply for grants, there are certain ways in which organizations can legally accept donations, fund their business, and serve the community. While donors will not be able to write off their contributions in their taxes, a compelling cause will still attract the support of people who care.
Crowdfunding is the easiest way to bring in monetary donations. You do not have to be registered as a 501(c)(3). In order to host a fundraiser, but you should be direct with where the revenues are going. For example, if you run an organization that helps dogs lose weight, you should specify that funds will be going toward low-calorie dog food and leashes for walking.
To begin a crowdfunding campaign, consider different platforms (such as Fundly or Donorbox, to name a few). The aesthetic and ability to tailor the platform to reflect your organization varies for each platform. Compare by cost and the percentage taken out from donations, and which platform aligns best with your purpose.
Once you’ve chosen your platform, add personality to your page. Set up a video – even if it’s just a video montage relevant to your organization. Then, write an impactful description addressing a few W’s: what you’re doing, what this fundraiser is addressing, why people should care about your cause, and why they should support YOUR organization over somebody else’s.
Donations to organizations that are not registered as 501(c)(3)s are not tax-deductible. However, you can create fun different perks for potential donors. For example, $25 will earn a shout-out on social media. You can also make it personal: if you’re running a dog weight-loss program, for $50, the donor can have their name or business logo on a leash.
Pro Tip: Make crowdfunding campaigns impactful. Tell followers what each donation means to your organization. For dog weight loss programs, you may say that $8 equals one can of low-calorie food. This adds a personal level to the fundraiser – people are more likely to donate when they have a tangible explanation of where their money is going and how it is creating change.
If you feel uncomfortable asking for monetary donations due to your nonprofit status, consider a physical donation drive. This is perfect for organizations treating the community in more tangible ways, such as with clothing, food, or other specialty items.
First, think of what you need. If you’re an organization looking to eliminate childhood hunger, then you can ask for cans of food and other non-perishables – most people have cans of food laying around the back of their cabinets. Or, in the aforementioned example of dog weight loss, ask for items such as harnesses and leashes. People are happy to purge their closets and cabinets – especially for a good cause.
Pro Tip: Offer small prizes to increase the amounts of donations. For example, each person who donates receives a raffle ticket for a $10 coffee shop gift card. It doesn’t have to be a big reward (though partnering with others can be a win-win, such as with local artists), but an enticing reward will increase donations.
Is there a specific nonprofit whose mission you align with and brand you relate to? Consider opening a local chapter of a nonprofit, such as the Girl Scouts or Habitat for Humanity, and raising funds that way. It takes the pressure off of you—no necessity to organize a community or company—and you can be a part of a team.
Pro Tip: If the nonprofit you’re looking at doesn’t have an affiliates program on its site, you should still reach out! It may not be listed, or you may spur an idea for the future.
First: what is fiscal sponsorship? As Donorbox explains, a fiscal sponsor “is a tax-exempt organization that agrees to receive funds on behalf of another nonprofit or project, one that doesn’t have a tax-exempt status yet.” Fiscal sponsorships’ two most common models are comprehensive grants and pre-approved grants.
Comprehensive grants turn the sponsored organization into a “project.” So, the sponsor is responsible for receiving and managing all funds, and the grantee effectively signs over much of their control to the sponsor. Therefore, the sponsor is able to choose what the funds from the “project” go toward.
Pre-approved grants, on the other hand, give the grantee a bit more control over their funds and which aspects of their organization that the grantee would like to fund. However, the sponsor ultimately has full control of the funds, there’s simply more freedom in project implementation.
Comprehensive grants are great for organizations just starting up, simply looking to support a greater cause, as well as for those dipping their toes in the water of running a nonprofit.
Pre-approved grants work well for organizations that are great for those currently applying to become a 501(c)(3), especially for very small teams (or even teams of 1!).
It is crucial to have all discussions in writing – and not just emails. Draft a contract outlining every detail, such as pricing, trades, available resourcing, and ending the agreement. This can save you the headache of future legal trouble. If you have the resources, consider talking with the attorney about the benefits and constraints of each, then have them look over the contract prior to sending out and signing.
Pro Tip: If you have not written this form of agreement before, there are examples and templates available. Donorbox has examples here.
A donor-advised fund or DAF is a charitable giving vehicle administered by a charitable sponsor. It is created to manage donations on behalf of organizations, families, or individuals. A charitable sponsor is a 501(c) (3) organization and holds legal control over the donor-advised fund. They include public charities, community foundations, and charitable funds that are associated with an investment firm.
How it works is that donors contribute to a fund held by a charitable sponsor and receive an immediate tax benefit. Over a period of time, donors recommend grants from the fund to their favorite charities. The charitable sponsor awards grants to nonprofits recommended by
donors.
These donor-advised funds are usually invested in mutual funds or other investment vehicles. That allows the value of the funds to grow over time, thereby increasing the donor’s ultimate philanthropic impact.
Grants or gifts from donor-advised funds should be credited to both the charitable sponsor and the donor.
Pro tip: Ensure that you thank them both. Just like you credit both the charitable sponsor and the donor, you’ll also want to thank them both, too.
Social entrepreneurship is an approach by companies, or entrepreneurs, in which they develop, fund, and implement solutions to social, cultural, or environmental issues. It basically means doing business for a social cause. Social entrepreneurs combine business and social issues in a way that improves the lives of people connected to the cause.
Are there any social entrepreneurs whose goals align with yours? Consider approaching them for funding for your projects.
Just because your organization does not have 501(c)(3) status does not mean that you cannot participate in fundraising activities to support your cause.
Raviraj heads the sales and marketing team at Donorbox. His growth-hacking abilities have helped Donorbox boost fundraising efforts for thousands of nonprofit organizations.
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