With the economy still sluggish, a lot of organizations are searching for grants to provide them with a needed financial boost. Unfortunately, grants aren't a perfect fit for every organization's need.
Grants will usually not help an organization secure 501(c)3 status.
With an abundance of organizations requesting grant money, grant makers can chose from a variety of worthy applicants. As a result, grant makers and foundations tend to favor organizations that have a strong, successful track record. It's rare to find a grant opportunity that will help a nonprofit gain its initial footing. Start-up costs, including the cost of getting 501(c)3 status, are usually not eligible for grant funding.
Grants will usually not pay for organizational costs, including salaries.
Many grants are project-based, which means that the grant dollars are to be used to support the project that was proposed in the grant application. How much of the grant funds can be used for other purposes, including administrative costs, should be spelled out in the grant guidelines. In general, however, most foundations and grant makers expect that their grant dollars will be used to directly support the cause at hand, rather than administrative fees or salaries.
An exception are grants that allow for indirect rates, which can be used to help offset some administrative costs. To learn more about indirect rates, you can read a past Grant Helpers blog post, "Grant Writing Lesson: What is an Indirect Rate?".
Grants will usually not sustain an organization.
It is usually not in the best interest of a foundation or grant maker to create a co-dependent organization through continuous grant awards. As a result, all grants come with an end date. Some foundations do allow for organizations to reapply for grants after their award ends, but not all. When applying for grants, we regularly advise clients to think through how they will sustain the proposed project once the grant period ends, and including this plan in your grant application can make your grant proposal more competitive.
Of course, every grant opportunity is different, so be sure to read through a grant's guidelines before applying and take note of any spending restrictions that are in place.