What Is Grant Funding? A Guide for Nonprofits and Charities 

Everything there is to know about grants – what they are, how they work, who provides them, and how your nonprofit can get started with finding funding opportunities 

If you’re a nonprofit trying to raise funds, chances are you have already encountered grant funding. 

But what is grant funding? 

Are grants the same as donations? Do they function in a similar way to loans? Who can provide grants to nonprofits and charities and how can you start looking for funding? 

Grants may support programs, projects, equipment, services, research, and organizational development. However, grants are not just “money for nothing” granted to a nonprofit because of the need for funding. 

Successful grant funding is all about finding the right funder, strong alignment, and making a compelling case for impact. 

In this guide, we will explain what grant funding is, where grants originate from, how the process works, and how you can start identifying funding opportunities. 

What Is Grant Funding? 

Grant funding is money provided to an organization in order to carry out work on a particular purpose, program, project, or area of operations. 

Grants for nonprofits may be provided by foundations, government agencies, corporations, community foundations, charitable trusts, and other funding organizations. 

Contrary to loans, grants generally do not have to be repaid if the recipient uses the money appropriately in accordance with the terms of the award. 

In simpler words: 

A grant is funding provided to help an organization conduct activities aligned with the priorities of that funder. 

That may involve running a community program, expanding services, purchasing equipment, conducting research, upgrading a facility, and many others. 

Grant funding is usually not provided just because a nonprofit requires money. 

Potential funders should understand the problem that your organization addresses, who it impacts, what results you aim to achieve, and whether your work is in line with their priorities. 

That is why grant funding is not just a fundraising tool but also a process of building relationships. 

What Is a Grant? 

A grant is a funding award provided by a funder in order to support work aligned with its mission, priorities, or interest. 

Nonprofit grants can be allocated for programs, new projects, general operating costs, equipment, technology, research, training, capacity building, capital improvements, and much more. 

Every funder has its own priorities and requirements. 

Some offer flexible funding that can be used for general operating costs. Others can only support certain programs, pilot projects, research, equipment, or capital improvements. 

That is why it is important for nonprofits to conduct research on every potential funding opportunity before applying for it. 

Grant vs. Donation vs. Loan 

Grants, donations, and loans can provide money to an organization but they function in a completely different way.  

	Grant	Donation	Loan
Repayment required?	Generally no	No	Yes
Usually tied to a specific purpose?	Often	Sometimes	Depends on the agreement
Application required?	Usually	Usually not	Yes
Reporting may be required?	Often	Sometimes	Repayment terms apply
Common sources	Foundations, governments, corporations	Individuals, companies, donors	Banks and other lenders

The key difference is that a grant is usually awarded to a nonprofit due to its work being aligned with specific funder priorities. They may also have certain requirements as to how the money should be used and how the results should be reported. 

Who Gives Grants to Nonprofits? 

Nonprofits and charities can receive grants from private and family foundations, public and community foundations, corporate foundations, government agencies, charitable trusts, faith-based funding sources, and civic organizations in the community. 

However, all these sources of funding function differently. 

Some of them have publicly available application portals. Others ask nonprofits to submit a Letter of Inquiry. Some operate by invitation. And some of them may provide very limited information online. 

Private Foundations 

A private foundation is usually funded by an individual, family, corporation, or another private entity. 

Private foundations can fund a wide range of causes including education, healthcare, animal welfare, arts, environment-related initiatives, disability services, and many others. 

Private funders can be great potential funders for your nonprofit, but they are not always easy to discover. Some of them lack public websites or publishing information on applications. Sometimes the best grant funding opportunity may be the funder that does not have an advertised grant program. Instead, it may be a foundation with a history of supporting nonprofits similar to yours. 

Family Foundations 

A family foundation is a private foundation that is established, funded, or governed by a family. 

Family foundations usually support causes related to their family’s values, experiences, community, and other philanthropic interests. 

They may provide very limited information publicly and not have an application portal. However, their history of supporting similar nonprofits can prove alignment and become very useful in grant-seeking process. 

Public and Community Foundations 

Public and community foundations are usually funded by donations from multiple donors. 

Community foundations usually focus on a particular geographic region and support nonprofits, charities, schools, and other initiatives in the area. 

Compared with many private foundations, these funders usually have more visible grant programs, deadlines, portals, and eligibility requirements. 

Government Grants 

Government grants are grants provided by local, municipal, provincial, state, or federal government bodies. 

They may support areas such as health, education, housing, workforce development, research, social services, arts and culture, infrastructure, and environment-related initiatives. 

Government grants can provide significant funding, but their application, compliance, and reporting requirements can be quite detailed. 

Corporate Grants and Corporate Foundations 

Companies usually support nonprofits through corporate foundations, charitable giving programs, sponsorships, and community investment initiatives. 

Corporate funding may be related to local communities, education, workforce development, health, sustainability, and other company priorities. 

The key issue here is whether the nonprofit and the funder are really aligned.  

Grant Funding Sources at a Glance 

Type of Grant Funder	Typical Visibility	What Nonprofits Should Research
Private foundations	Often lower	Giving history, past recipients, geography, grant amounts, funding interests
Family foundations	Often lower	Causes supported, geographic ties, previous grants, trustees, family interests
Public and community foundations	Usually higher	Eligibility, geographic focus, priorities, deadlines, typical awards
Government grants	High	Eligibility, deadlines, allowable expenses, compliance, reporting
Corporate grants	Moderate to high	Corporate priorities, community focus, employee involvement, eligibility

There is no universal “best” source of grant funding. 

The key funding opportunity for your organization is the funder that has the most aligned priorities, geography, giving history, typical grant amounts, and application process. 

How Does Grant Funding Work? 

Though the process may vary depending on the funder, there is a universal flowchart for nonprofit grant funding: 

Find opportunities → Research the funder → Check alignment → Submit an LOI or proposal → Funder review → Funding decision → Reporting and stewardship 

1. Identify Potential Funders 

The first step in grant research is to find organizations that may fund your activities. 

Google search is a great tool for discovering public opportunities and foundation websites, but it does not uncover every potential funding source. Some private foundations have low visibility online. 

That is why grant research involves not only Google but also grant-funded activities, past recipients, geography, typical grant amounts, and application preferences. 

2. Check Alignment 

Identification of a foundation is not a guarantee that this organization can be a good funding prospect for your nonprofit. 

Before spending any time on approaching the funder, you should ask yourself whether the funder funds causes that your organization supports, provides grants to similar nonprofits, gives in your geographic area, awards reasonable grant amounts, and accepts the type of funding request you are going to submit. 

3. Research the Foundation’s Giving History 

The giving history of a foundation can be a valuable tool in grant research process. 

What we see in foundation research: A foundation’s mission is not everything. Its giving history can show you who this funder really supports, where it gives, what kind of grants it usually makes, and whether similar organizations are among its grantees. 

Past funding does not mean that the funder will make grants to your nonprofit in the future. However, it can provide you with insights into funder’s priorities and activities. 

4. Submit an LOI, Proposal, or Application 

After finding an aligned funder, follow its application procedure. 

It may include submission of a Letter of Inquiry, full proposal, online application, email introduction, and more. Always stick to published application instructions. 

A Letter of Inquiry is usually used as an introduction to your nonprofit, funding need, project, and potential alignment with the foundation’s priorities. 

5. Funder Review and Decision 

A funder may consider the alignment of nonprofit mission, community need, expected impact, nonprofit’s capacity, budget, and fit with the current priorities. It may either approve the grant request, deny it, ask for additional information, or ask you to send a full proposal. 

6. Reporting and Stewardship 

If your nonprofit gets the grant, use the money according to the terms of the award and fulfill any reporting requirements. 

Stewardship means demonstrating what impact the funding had on the organization and maintaining the professional relationship with the funder. 

This relationship will help you build even stronger connections and create future funding opportunities. 

What Can Grant Funding Be Used For? 

Depending on the funder, grants can be used to support programs, new projects, organizational expansion, operating costs, staffing, equipment, technology, research, training, capacity building, capital improvements, and community initiatives. 

What a grant can fund ultimately depends on the funder’s guidelines and terms of the award. 

Some foundations provide general operating funding. Others fund only specific projects or expenses. 

Before applying for a grant, make sure to check both published guidelines and historical grants if they are available. 

How to Get Started With Grant Funding 

If your nonprofit is new to grants, try to focus on the process. 

Step 1: Define Your Funding Need 

Be clear about what your organization does, who it serves, what needs funding, how much money you need, and what results you expect to achieve. 

The better your funding need is defined, the easier it will be to identify aligned funders. 

Step 2: Find Aligned Funders 

Apply to every funder you can find. 

Instead, look for organizations that support your cause, provide grants to similar nonprofits, give in your geographic area, and allocate grants at appropriate levels. 

If you have just started research, read our guide on how to find foundations for grants. 

Step 3: Research Before You Apply 

Research the funder’s giving history before spending time on its approach. 

Look for similar grantees, geographic focus, realistic grant amounts, recent activity, and proof that your work aligns with funder’s priorities. 

Your goal is not to find the most funding sources. 

It is to find the right funding sources. 

Step 4: Track Outreach and Follow-Up 

Once you have started reaching out to funders, track deadlines, letters of inquiry, applications, responses, follow-ups, and other actions. 

As your pipeline expands, you may need to use grant management software in order to keep track of grant applications and not miss any deadlines or follow-ups. 

Where Grant Advance Specializes: Private Foundation Grants 

Grant Advance Solutions specializes in helping nonprofits research private foundation funding opportunities. 

It is not easy to research private foundations since many of them do not offer grant opportunities publicly or maintain extensive public websites. 

However, they still make grants every year. 

We help nonprofits research foundation profiles, historical grants, past recipients, giving trends, geography, and grant amounts in order to determine whether the funder is a good prospect or not. 

The goal is not to apply to every private foundation. 

It is to identify more aligned prospects and make more informed decisions about which funders are worth pursuing. 

Conclusion: Grant Funding Starts With Alignment 

Grant funding is about more than grant submissions. 

It is about knowing what your organization needs, identifying right funders, researching how those funders give, and showing how your nonprofit can help them achieve their goals. 

Effective grant funding starts with research. 

And good research starts with alignment. 

Ready to Get Started? 

If your nonprofit is ready to find better-aligned private foundation opportunities, book a free consultation with Grant Advance. 

We’ll show you how to research potential foundations, analyze giving history, organize prospects, and create a focused foundation funding strategy.

FAQ About Grant Funding for Nonprofits