Nonprofit External Funding

NONPROFIT External Funding
Nonprofits can access grants, program-related investments, and charitable donations.

Nonprofit organizations can accept tax-subsidized money in the form of grants, program-related investments, and charitable donations, which can be earmarked by donors for particular purposes. Donors are able to deduct charitable donations before paying a graduated tax on the remainder of their taxable income. Accepting charitable capital has advantages as well as disadvantages and raising philanthropic funding can be an endless and difficult task, which will often require the majority of a founder’s time and effort.

Nonprofits are not permitted to distribute profits to individuals, so cannot raise investment capital. However, nonprofits can access commercial capital, in the form of debt. Many large health and educational institutions, like Stanford University, are organized as nonprofit entities and have historically been able to access a lot of external capital – but as debt and not equity funding.

Additional resources

Entrepreneur Interview

Habitat for Humanity raises over $500 million a year to support its mission. Jonathan Reckford, CEO of Habitat for Humanity (MBA ‘89), talks about the importance of fundraising to support not just house building but also impact measurement, quality and financial audits, and strategic initiatives. He shares how switching from the mindset of "it's my job to extract money from you, donor," to "it’s my opportunity to help you have meaning in your life," changes fundraising into a meaningful dialogue with funders.

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