These days, many nonprofits are concerned about losing—and replacing—grant money. While it’s always advisable to diversify revenue streams when one is under attack, it doesn’t mean you shouldn’t continue to apply for funds.
It also doesn’t mean you’re limited to federal grants. In this article, we will talk about different sources of funding for nonprofits and then explain why including a budget narrative can give you an edge.
Nonprofits raise a significant amount of money through traditional fundraising. Direct mail, email, events, peer-to-peer, and SMS are all effective channels for campaigns. But it’s also advisable for nonprofits of all sizes to consider alternative methods of funding.
Many of these require a proposal and budget, and that’s when understanding budget narratives comes in handy.
Here are a few sources of funding you might want to consider:
Nonprofit grants have been in the news a lot lately, but federal grants are only one piece of a very extensive puzzle. Consider some other types available to nonprofits:
State and Local Grants are sometimes tied to federal loans. However, state and local governments often have their own funding mechanisms, including tax revenue, to fund programs and grants.
Foundation Grants are funded by private and corporate foundations (think of the Gates Foundation) and require a proposal with objectives, expected outcomes, and a detailed budget.
Community Grants, likely available right in your backyard, can be a valuable source of funding, as these organizations understand how the investment will benefit the community.
Corporate Foundations like Google and Walmart offer different types of funding. Google Ad Grants are an example. It’s not cash, but it’s free Google ads to drive donations.
Major Gift prospects might require a proposal, but even if not, it’s wise to walk through the process so you’re prepared for how a contribution will be used and its expected impact.
Naming Rights and Capital Campaigns are sources of funding for large projects, such as building a new facility.
Impact Investing is when foundations and financial institutions provide low-interest loans to mission-driven nonprofits.
With so many funding options available, securing support isn’t just about identifying the right sources—it’s about crafting a compelling proposal that stands out. A key component of that is a clear and persuasive budget narrative.
Because budget narratives can be the difference between a winning and losing proposal, I looked to an expert for best practices. Lauren Brownstein, a nonprofit consultant and fundraising strategist, recently shared key insights on how to write an effective budget narrative.
With her permission, I will include some of the highlights from her insights in this article.
Also called a budget justification, a budget narrative is a detailed written explanation of a proposed budget submitted by nonprofits requesting funds. It provides context for the numbers, helping the funders understand how the funds will support the proposed project or the nonprofit’s goals.
A well-prepared budget narrative helps your nonprofit’s chances in a few ways:
Lauren explains that a budget narrative does not aim to explain every line item in a budget. Rather, she says, think of the budget narrative as a way to quickly clarify how you plan to spend the donor’s money. While you’re at it, emphasize how this funding will help your mission or the messaging of your proposal.
Here are some recommended questions you can answer to structure your budget narrative:
She reiterates that a budget narrative need not be lengthy. “This is not the place to reiterate...your organization’s mission. (It) is specifically focused on the operational plan that you will undertake when you execute your project,” Lauren says.
No! If the budget is simple and the proposal explains the budget well enough, you probably don’t need a narrative. However, if you’re asking for a lot of money or have a complex project or plan, it can help your case to explain your rationale.
Of course, if the potential funder requests a narrative or explanation, it’s a mistake to skip it. It likely won’t ever hurt your chances but can often help.
Securing funding for a nonprofit requires a strategic approach, whether through grants, corporate sponsorships, major gifts, or impact investments. While identifying potential sources of funding is essential, presenting a compelling and well-structured proposal is just as critical.
A well-prepared budget narrative can be the key to standing out in a competitive funding landscape. It helps funders see the value of their investment in your mission by clearly explaining how funds will be allocated and demonstrating transparency.
While not always required, it can provide the extra clarity and build the trust needed to turn a promising funding opportunity into a secured grant. As you refine your fundraising strategy, consider how a strong budget narrative can support your proposals and ultimately help your nonprofit achieve greater impact.