The Differences Between Grants and Donations


grants and donations

When it comes to raising money for a nonprofit, there are many options. One of the most popular is a grant. Grants can be used to fund many different types of activities, and they are often more flexible than donations, which are usually more limited in their scope and purpose.

Grants, which are usually larger sums of money, can make a significant difference for a nonprofit and help to support a number of different projects and future ambitions. However, it is important to understand the differences between grants and donations. It is also important to know how to properly record both in order to remain compliant with IRS regulations.

What is a Nonprofit Grant?

A grant is a sum of money given by a government body or another organization for specific purposes. These grants are normally project-specific and may come with attached terms and conditions. Grants can be categorised as either cash or in-kind donations and will need to be recorded according to their classification. In the case of a grant, it is important to record these as soon as they are received. This is because the moment they are received, they become usable income and need to be recognised.

Donations, on the other hand, are non-required gifts that do not have any attached conditions or restrictions. Donations are a form of free-will giving and can be made by any individual or business. Nonprofits can often increase the likelihood of receiving a donation by using online donation platforms such as PayPal and by making it easy for donors to donate through mobile phone technology, such as the Text to Give service offered by Women Working Worldwide.

When applying for a grant, it is essential to research the funder thoroughly and understand their mission, goals and priorities. Research can also be helpful in preparing a detailed and compelling proposal. By writing a detailed and comprehensive proposal, a charity can demonstrate its expertise and knowledge in the field in which it is working. This will be a big advantage for any charity when competing with other non-profits for funding.

There are a wide range of grants available, from program support (operating) grants to challenge grants where the charity is required to match funds raised by other donors. There are also unit of service performance grants where a specified amount is paid by the grantmaker every time the nonprofit provides a certain unit of service. Other types of grants include equipment grants and seed funds for new projects. All of these are available for organizations that take the time to apply for them and can greatly enhance the profile of a charity. The prestige associated with being funded by a large philanthropic foundation or corporation can also significantly improve a charity’s credibility when it comes to fundraising. This is especially true if the grant is for a new and innovative project that is unlikely to be repeated elsewhere. This can be a real game changer for small and new charities.

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