Initial Questions

People new to the fundraising process often ask the following questions of Foundation Center staff.

What is a foundation?

The Foundation Center defines a private foundation as a nonprofit corporation or a charitable trust, with a principal purpose of making grants to unrelated organizations or institutions or to individuals for scientific, educational, cultural, religious, or other charitable purposes. A private foundation derives its money from a family, an individual, or a corporation. An example of a private foundation is the Ford Foundation. By contrast, a grantmaking public charity (sometimes referred to as a "public foundation") derives its support from various members of the public. An example of a grantmaking public charity is the Ms. Foundation for Women. Most community foundations are also grantmaking public charities. Foundation Center publications and databases cover private foundations, corporate giving programs, community foundations and other grantmaking public charities. For more information see our FAQ What is a Foundation?

Who gets foundation grants?

Grantmakers typically fund nonprofit organizations that qualify for public charity status under section 501(c)(3) of the Internal Revenue Code. These are organizations whose purposes are charitable, educational, scientific, religious, literary, or cultural. Their income cannot benefit private individuals, and their influence on legislation or political campaigns is restricted. Public schools, libraries, and other government organizations also qualify as public charities, although they usually have not applied for 501(c)(3) status.

Occasionally funders will make grants to organizations whose tax-exempt status is still pending, but most will ask for proof of your nonprofit status before considering you for funding.

If you decide to seek nonprofit tax-exempt status, the Establishing a Nonprofit Organization online tutorial should help you get started. Be aware, however, that procedures vary from state to state; you may need to consult with an attorney or a technical assistance agency whose staff is experienced in this area. Foundation Center libraries have a number of relevant resource materials on establishing a nonprofit organization.

Under federal law, foundations are permitted to make grants to individuals and organizations that do not qualify for public charity status if the foundations follow a set of very specific rules outlining their expenditure responsibility. The rules for expenditure responsibility require the foundations to file a number of reports certifying that the funds were spent solely for the charitable purposes spelled out in the grant.

Under certain circumstances individual grantseekers may be able to proceed by affiliating with an existing organization that is eligible to receive grants and willing to act as sponsor or fiscal agent for your project.

What do funders look for in a grantee?

Funding officials will first ascertain that the purpose of an organization or project matches the funder's interests. They will also seek evidence that an organization is well known in its community and that it addresses an existing need. A history of funding by other sources, whether governmental or private, helps establish credibility. Sound fiscal management, a strong, involved board, committed volunteers, qualified staff, and a realistic budget are also all very important considerations. In today's economy, grantmakers will also look for evidence of financial sustainability beyond the period of the actual grant.

Do funders only support well-established organizations?

The answer depends on the foundation, its guidelines, and its grantmaking patterns. Like individuals, some are cautious, others are risk-takers; some conservative, others progressive. Foundations that support new organizations or projects may be identified through the Types of Support indexes in Foundation Center directories and through the search capabilities of the Foundation Directory Online under "Seed money." Newer or start-up organizations can establish credibility in other ways, for example with a committed board of directors or evidence of strong community support or collaboration.

What types of support will a grantmaker give?

Although many funders will consider general support, others want to fund specific projects or activities. You will want to determine which type(s) of support a funder prefers in advance, since there is no point in approaching a funder for support for an addition to your building if the foundation only funds research. For the most common kinds of support, look at the Types of Support indexes in Foundation Center print and electronic directories. In each index you will see a list with definitions. For example, continuing support is defined as renewal grants to the same recipient for the same purpose, project, and type of support. Foundations occasionally restrict the number of new proposals they will accept because of ongoing commitments. One thing is certain: funders do not want grant recipients entirely dependent on them for an indefinite period of time.

Most, but not all, foundation support is made through grants. A few foundations make program-related investments (PRIs), which are most commonly loans to for-profit or nonprofit entities for purposes closely related to the foundations' funding interests. To identify foundations making PRIs, refer to the Foundation Center's The PRI Directory: Charitable Loans and Other Program-Related Investments by Foundations, or the Types of Support indexes in Foundation Center print and electronic directories.

Do foundations support for-profit initiatives?

Foundations generally do not award grants to for-profit businesses. However, some make program-related investments as described above. For information on federal funding programs, see the Small Business Administration's web site.

Does it help to know someone at a foundation?

In grantseeking, personal contacts usually do help. Although knowing someone personally may make it easier to have your proposal considered, putting pressure on those reviewing your proposal can backfire. Demonstrating that your organization has strong leadership often will go further toward securing a grant than personal contacts.

If a foundation's guidelines or descriptive directory entries state that it makes grants to pre-selected organizations and that it does not accept unsolicited requests for funds, explore the possibility that someone who knows your organization well, such as a board member, may have a contact at the foundation. If not, accept the challenge of figuring out how to attract the foundation's interest over a period of time.