Fundraising Private Sources

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The saying “money attracts money” is particularly fitting as it relates to fundraising in the nonprofit sector. Lenders rarely provide 100% financing, and they almost always expect to see equity in the project. Foundations and other philanthropic investors want to know who else has invested in your project, and will often establish challenge grants that match funds raised from other sources. In short, prospective investors want to see what sources of money you already have in place, and usually no one wants to throw the first dollar into the hat. So, where do you start?

National Nonprofit Funds

The Charter School Growth Fund supports the expansion of high-performing charter schools by offering a mix of grants and low-interest loans. For more information, check out www.chartergrowthfund.org.

NewSchools Venture Fund raises funds from donors to invest in public education entrepreneurs, organizations, and educators, especially for underserved communities. To learn more, visit www.newschools.org.

Private Foundations

Foundations are a vital component of any fundraising campaign. Charter school managers should undertake a thorough and persistent search to identify foundations that are interested in funding projects such as yours.

There are four main types of foundations.

  • Independent foundations are established by wealthy families or individuals.
  • Company-sponsored foundations (or corporate foundations) are created and operated by businesses.
  • Operating foundations pursue social welfare, research, or other charitable programs that are led by the donor or governing body.
  • Community foundations are supported by and operated for the benefit of a specific community or geographic region.

National foundations that provide funding for charter schools, such as the Bill and Melinda Gates Foundation (www.gatesfoundation.org) and The Walton Family Foundation (www.waltonfamilyfoundation.org), are sources of predevelopment and start-up funding, or other special initiatives funding. The Walton Family Foundation has a Building Equity Initiative to help public charter schools access capital to secure facilities (www.waltonfamilyfoundation.org/newsroom/building-equity-initiative-overview). Capital project funding can also be obtained from a community or family foundation, which often maintains a specific geographic focus.  

Foundations provide funds in one of the following ways: (1) grants, (2) program-related investments (PRIs), or (3) recoverable grants. Grants are made for a specific amount and purpose; no repayment is required. PRIs are investments made by foundations to support charitable activities that require repayment within a specified timeframe. Typically, PRIs carry below-market interest rates and are used to leverage additional dollars from other sources. Recoverable grants function as interest-free loans. For information on foundations across the country, visit the Foundation Center at www.fdncenter.org.

Applying to Foundations

Once you know you meet the eligibility criteria for a foundation, get an application or find out the process for applying. Most foundations make grants only once or twice a year.

Be Clear About Your Request. This guide is focused on developing your facility. If you are requesting foundation funds for your facility, you are looking for a “capital grant” (a grant for bricks and mortar or a “building grant”). This is different from a request for an operating grant (to pay staff, buy materials, etc.) to fund programs. Many foundations have specific guidelines for capital grants. Check before you apply.

Hone Your Message. If you are aware of a foundation’s hesitation over charter schools, think carefully about how you will present your program. A pre-application meeting can be useful to answer any questions about how charter schools work. Be prepared to respond to questions about charter schools siphoning resources from traditional public schools, etc. If you meet eligibility requirements in other areas, such as serving a low-income population, try to emphasize the impact of your program in reducing poverty, for example.

Demonstrate Stability. Foundations want to know how you will sustain your program in the future. They are concerned about grantees becoming dependent on foundation support. This is a good opportunity to demonstrate how your school is self-sufficient through per-pupil allocations.

Do Your Homework. Research the size of grants a foundation has made in the past, and be sure your request fits in that range. Also, foundations often require status reports to find out how their investment is doing. It is important to honor this commitment. Many schools use it as an opportunity to further familiarize foundations with their work.

Beware of Commingling Funds. Never change the use of grant funds without consent of the donor. Even if you are in a bind and need to make payroll, don’t use grant funds restricted for a capital project for any other use. Make sure you understand what the funds can be used for when you receive them, and make sure your financial management system can keep them separate.

Launching a Capital Campaign

A capital campaign is an organized, systematic approach to raising grant money for a specific purpose or project. The critical difference between a capital campaign and fundraising can be summed up in three words: focus, duration, and purpose. A capital campaign is planned around a specific goal, usually a facility project. The campaign can be as short as six months or as long as two or more years. Further, it requires a coordinated effort among the board of directors, school staff, management, and frequently, volunteer labor to implement the capital plan.

Consider hiring a fundraising consultant. These professionals can assess the campaign’s feasibility: How responsive are prospective investors (foundations, corporations, private investors, and the community at large) to your organization? Would they likely support your project, and to what extent? If the answers are affirmative, the consultant can then develop a targeted list of prospective candidates, set clear financial goals within a specified framework, and then implement the capital campaign.

The capital campaign plan should be a written document that includes financial benchmarks for each source of funds raised (e.g., foundation grants, corporate donations, individual donors, etc.), as well as a timeline for each goal. The plan should itemize each prospective funder category and the specific donors you intend to apply to in each category. If one of your board members or a friend of the charter school has a personal contact or prior relationship, you may decide to assign them as point person for that donor.

As noted in the previous section, foundations have varied initiatives and interests, so it is important to research appropriate candidates before making a formal application. In fact, many foundations require that you send an “inquiry letter” describing your project before submitting a formal application.

Individual Donors and Private Investors

Charter schools can also run successful campaigns targeted to individual donors. For example, a “Buy a Brick” campaign, with each donor’s name engraved on a brick footpath to the school’s entrance, or a “Wall of Community Supporters” using tiles decorated by students, can be a personal approach. These strategies generate dollars and build community goodwill for your capital project.

The cost of raising many small contributions from a large pool of people is usually high. Greater payoff may be found by targeting wealthy individuals in your community or by thinking creatively about novel approaches to financing the facility. For example:

  • Your seller may be willing to donate the property in exchange for a tax break.
  • A private investor may be willing to purchase a property and then lease it back to the charter school under more favorable terms and conditions than would be available in the open market.
  • A wealthy individual may be willing to donate stocks or bonds in exchange for a tax break, which could then be used to collateralize a loan.
  • A private group with a vested interest in your project, such as maintaining historical integrity, might contribute. For instance, the National Trust for Historic Preservation provides grants to projects related to maintaining and preserving historical buildings. For information on those grants, visit www.nationaltrust.org.

Investigating your options and determining how you will fund your charter school facility can be an intensive process. But in the end, you’ll be prepared to see your dreams for a facility become reality!

Legal Disclaimer:

Nothing in this material should be construed as investment, financial, brokerage, or legal advice. Moreover, the facts and circumstances relating to your particular project may result in material changes in the processes, outcomes, and expenses described herein. Consult with your own professional advisors, including your financial advisors, accountants, and attorneys, before attempting to consummate any transaction described in this material.