Funds From Grants
Public sector grants are made available by among others, charitable foundations and trusts. This type of funding does not have to be repaid. However, most funders will only give money to organisations that have charity status. In addition, not for profit and charitable organisations that generate a cash surplus every year or have large reserves may find it difficult to obtain grants from certain funders. Grants usually are made against set criteria including the achievement of specific targets and goals
Donations & Gifts
Donations come from a wide variety of sources including charitable foundations and trusts, companies, specific charitable appeals and philanthropic individuals. Organisations can normally utilise donation revenue for any purpose they see fit with the possible exception of donations which have been made in line with a specific appeal which calls for particular ways in which the donation funding is to be used. Donations and gifts can attract tax relief and are a vital income source for “not for profits”, social enterprises and charities
External Investment Funds
Third party investors may wish to provide equity capital for equity shares in the organisation. Typically, investment funds such as these do not require any security or have to be paid back. Investors’ motivation for making funding such as this available is to reap the benefits of the organisation they invested in becomes successful. Equity investors adopt a long term interest an organisation and may also wish to contribute other resources and expertise because their investment is at risk if the venture fails.
Revenue From Trading
A large number of social enterprises and “not for profits” generate revenue by selling services and products to other organisations, the public and their own service users. Organisations which pursue this funding route find that they have more flexibility regarding how they spend that revenue. A number of organisations generate all their income by this method. However, care must be taken in the governance of this activity to ensure that an organisation which delivers services to the public is not distracted from its mission or have its independence undermined.
Just like a member of the public or a “for profit” trading business, third sector organisations can borrow money from financial institutions. And just like everyone else they have to pay back the loan with interest added on. Many “not for profits” find that financing operations via loans provides a very useful and flexible type of funding that can be both easier to secure and quicker to access that funding from grants might be. Typically loans have to be secured against assets like property etc. Occasionally, lending organisations may provide unsecured loans as well. Irrespective of which type of loans is being piur4sued, lenders will seek to establish whether the organisation seeking the loan has a track record of success with generating income and delivering on their organisations stated aims and objectives.