NPO funding is an inevitable necessity for the operation of nonprofits. Income is needed to cover several costs such as office space, equipment, and employee salaries among others. Although the law restricts NGOs from carrying out several profitable activities to avoid losing their tax-exempt status. There are however several channels that are available for nonprofits to generate funding.
In this article, we will provide you with the various ways nonprofits can make money without risking their charitable status.
- Nonprofits are not established with the sole intention of making profits.
- NPO funding is nonetheless required to run and maintain the activities of the organization.
- However, the methods used to generate profit must be within the confines of the charities’ regulations
How can nonprofits generate NPO funding?
There are four common ways nonprofits can obtain revenues to run their organizations. They are:
1. Earned Income:
This is one great way for charities to make money. Earned income is an effective tool for NPO funding. The self-generated method enables NGOs to handle management costs. Earned income can be generated through service fees, membership fees, or sales of merchandise. However, all revenues obtained must serve the organization to preserve its charitable status.
Grants are prevalent sources of NPO funding for charitable organizations. Basically, it is obtained to undertake specific projects. Since the projects span a limited time, they do not sustain nonprofits for the long term. However, they are indispensable in carrying out the organization’s objectives. These grants can be given by the government, foundations or corporations.
This is the least common method used by nonprofits. It is however a legitimate form of NPO funding. A nonprofit may choose to open a brokerage account for investment. With their tax-exempt status, nonprofits may be excused from paying income tax on generated gains. Investment is also a great way to build long-term savings for nonprofits.
4. Individual Donations:
NPO funding can also be generated through individual donations. Nonprofit contributions by supporters, event sponsorship, online donations and gifts can be categorized into this group. Individual donations are a great source of revenue for nonprofits. Hence, organizations should make the needed effort to attract and sustain their contributions.
Nonprofits are not created with the sole intention of making profits. NPO funding is nonetheless required to run and maintain the activities of the organization. Hence, the need for capital is what spurs nonprofits to undertake various methods to generate income. These methods must however be within the confines of the nonprofit’s regulations.
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