How Does Fundraising Work: A Complete Guide to Raising Money for Any Cause

Maximize your fundraising efforts

If you want your nonprofit to thrive, relying on just one funding source isn’t enough. To keep the momentum going, you need a mix of revenue streams.

Individual Donations

To raise money for a cause, it’s important to connect with both major and regular donors. Start by understanding your donors. Who are they? What motivates them? Identify your top contributors and tailor your approach. Don’t forget about regular donors—they’re the backbone of your campaign. 

For major donors, build strong relationships. Over a five-year period, the average nonprofit can see a 127% increase in recurring donors, as stats show. Recent data also indicates a decline in the number of donors across various categories, except for “supersize” donors (gifts over $50,000), which remained stable.  

Apply for a Grant

Grants are a solid way to fund specific programs or projects. Foundations, government agencies, and private organizations offer funding for nonprofits. The process can be competitive though, but if you make strong proposals, grants can bring in large sums.  

Many nonprofits rely on grant funding at some point. Public researchers and hospitals, for instance, couldn’t stay afloat without stacks of grants. It sounds a little intimidating at first, but while grant writing involves some serious effort, it’s not rocket science. If you do your research and take the right steps, applying for a grant is a stellar way to get the cash you need–stat.

What is a grant? 

In the simplest terms, it’s financial support from a private or governmental institution for a specific project, person, activity, or program. Grantmakers tailor their financial support to the nature of the scheme you’re applying for. If you’re building a particle accelerator, you’ll need to score billions of dollars. If you’re building a neighborhood animal shelter, you’ll be looking for a lot less.

Why apply for a grant? 

Aside from the obvious–free money, duh–a grant enhances your organization’s reputation. The ability to attract and secure funding from big shot institutions sends a loud signal to your supporters that your mission is worth investing in.

What types of grants are there? 

Grants take two main forms.

• General Purpose Grants: A general purpose, or operating support, grant goes toward the cost of keeping your nonprofit humming on a day-to-day basis. It’s an open-ended gift, meaning you can use it to pay your staff, bankroll your next craft sale, or just save it for a rainy day.
• Program Support Grants: Grantmakers award program support grants for a specific activity. This is a restricted form of funding, meaning that you can only use it for the project you applied for, and only within a specific time frame. Let’s say you apply for a grant to run an after-school art program. You’ll receive a certain amount to be used exclusively for artsy activities, from January to May, for example.

How can I get a grant?

1. Do your homework: Obtaining a grant begins with research. Consider your nonprofit’s needs, location, and program type. Then narrow your search radar to foundations that have a strong history of supporting your cause. Many grant organizations only award funding in specific geographic locations, or for certain types of programs. 

For example, the Stewardship Foundation prioritizes grants to faith-based organizations operating in Washington, while the Frederick W. McCarthy Family Foundation prefers to award those programs that are dedicated to educational organizations around the globe. Use free grant databases like https://grantgopher.com/Grants-for-Nonprofits and grants.gov to search for available grants; paid databases like GrantWatch offer more options.

2. Write a grant proposal: The actual process of putting together a grant proposal can seem daunting. After all, that’s why organizations hire certified grant writers, right? Yes and no. You can certainly go the professional route, and there are plenty of grant writers to choose from. But if you’re dedicated and determined, you can write the thing yourself. Yes, you can. 

Keep the following in mind:

• Tailor your proposal to the institution. Don’t just blast out a cookie cutter proposal to every grantmaker in the country and expect to get a reply. Does the foundation jive with your mission? Great, explain why. If you admire what they stand for, say so–briefly!
• Read the instructions. Most funders will have straightforward, detailed requirements for how to apply. Follow their instructions to the letter, don’t cut corners, and submit way before the deadline.
• Have clear dates and budgets. Does your organization eat through $300 in heating every month? Do you intend to have that historical house museum re-painted by Christmas? Be very, very clear about costs and timeframes.
• Include a cover letter. First impressions count. Include a simple, to-the-point letter that summarizes your goals and is addressed to a specific person. Never send letters that open with “To Whom It May Concern” or “Dear Sir or Madam” – it’s unprofessional and shows that you didn’t do your research.
• Put yourself in their shoes. Grantmaking bodies receive thousands of applications. Make it easy on them. Don’t make your reader hunt through your documents for a budget breakdown or wade through dozens of testimonials. Be clear, straightforward, and concise.

Corporate Sponsorships 

Corporate sponsorships are a win-win. Companies are often willing to sponsor Events or offer matching gifts to their employees. These partnerships bring in money while increasing your visibility. When a business backs your cause, they share it with their networks, expanding your reach.

Example: A nonprofit hosting an annual 5K run partners with a local tech company for corporate sponsorship. The company provides a large donation in exchange for branding at the Event, social media mentions, and logo placement on race t-shirts.  

Corporate support comes in many forms, each offering unique ways to strengthen your nonprofit’s mission.  

1. Philanthropic Donations
   Just like individual donations, these are no-strings-attached contributions from companies. 
2. Event Sponsorship
   This is short-term support tied to a specific Event, like a charity gala or 5K run. Companies contribute money in exchange for brand visibility during the Event. 
3. Cause Marketing
   A longer-term partnership where companies align their brand with your cause. They promote your nonprofit in their marketing campaigns, driving awareness and support. 
4. Pro Bono Services
   Companies offer their professional expertise and services for free. This could include legal advice, marketing support, or IT services—anything that helps reduce your operational costs. 
5. Matching Gifts
   Corporate matching gift programs double the impact of donations made by employees. When an employee donates, the company matches the gift. 
6. Paid Release Days
   Some companies give employees paid time off to volunteer. This allows staff to contribute to your cause during work hours, offering valuable hands-on help without losing income. 
7. In-Kind Gifts
   Instead of cash, companies donate products or services. This can include anything from office supplies to technology, helping you reduce expenses. 
8. Check-Out Campaigns
   Customers donate to your cause while shopping. At the register, shoppers can round up their bill or add a small donation to support your mission. 

Host a Fundraising Event

Events like galas are a fun way to raise money for a cause and connect with your community. They also help create excitement around your cause. Combine your Events with online donations for even more reach. The more people involved, the more donations you’ll receive. 

Example: A children’s hospital organizes a yearly charity gala, complete with a silent Auction, live entertainment, and a fundraising dinner. They integrate an online donation page that allows guests to give in real-time during the Event. The hospital also promotes the Event on social media to increase participation from supporters who can’t attend in person.

Start a Membership Program

Membership programs give you a regular, steady income. In exchange for a membership fee, your supporters get exclusive perks like early access to Events or special content. These programs create a loyal group of donors who stay connected and engaged. When they feel part of your community, they’ll keep giving. 

Example: A local museum creates a membership program that offers tiered benefits: basic members receive free entry for one year, while premium members get VIP Event access and invitations to exclusive exhibitions.  

In-Kind Donations 

Not all gifts are cash. In-kind donations are non-monetary gifts, like goods, services, or volunteer time. Local businesses might donate supplies, or professionals might offer pro bono services. These donations lower your costs and stretch your fundraising dollars.  

Example: A food bank partners with local grocery stores, restaurants, and farms to receive in-kind donations of food and supplies. A local company donates their warehouse space for free, reducing overhead costs. Volunteers donate thousands of hours annually to sort and distribute food, ensuring that more funds can go toward purchasing additional food for the community. 

Alumni & Volunteers 

Don’t overlook the power of your alumni and volunteers. Alumni and volunteers are often some of your most loyal supporters.  

For example, a university could engage alumni by promoting a “giving day” where graduates contribute back to their alma mater. They can do so through an online campaign with easy donation links.  

Volunteers, too, can become major contributors in the long term. Many volunteers feel a deep connection to your cause and may want to offer financial support once they’ve seen firsthand the work you’re doing. By staying in touch and offering meaningful ways for them to get involved, you can turn these loyal supporters into donors. 

Engage with these groups and turn them into long-term donors by keeping them informed, involved, and appreciated. This is one way to raise money for a cause that will generate long-term support. 

Capital Campaigns & Text-to-Give 

Capital campaigns are ideal for raising funds for major, long-term projects like building a new facility or expanding services. For example, a local animal shelter might run a capital campaign to raise funds for a new adoption center. They could target large donations from major supporters and show potential donors the tangible impact of their contributions, such as naming opportunities for rooms or buildings.  

Example: A university is launching a capital campaign to raise $5 million for a new campus building. They target major donors and alumni, offering recognition on donor walls and naming rights for larger contributions.  

Capital campaigns often run for a few years, allowing nonprofits to reach out to multiple donor segments for support. If your nonprofit has a big goal, this is the best way to raise money. 

Text-to-Give is a quick and easy way to collect donations, especially at Events. For instance, a nonprofit hosting a charity run could display a simple “Text [KEYWORD] to [NUMBER]” sign.  

Attendees can text in donations from their phones in seconds. A campaign might also use Text-to-Give for emergency fund drives, encouraging people to donate on the spot during a live broadcast.  

Keep in mind that it takes an average of 90 seconds to respond to a text message, compared to 90 minutes for email, and that over 50% of people visit nonprofit websites on their mobile devices. 

Example: A disaster relief organization sets up a Text-to-Give campaign during a national emergency. By texting “GIVE” to a short code, donors can contribute $10 instantly via their phone bill. 

This method is perfect for reaching busy supporters who may not be able to attend in person but still want to contribute. It’s fast, easy, and accessible. It’s great for Events or campaigns, especially when paired with social media. This is a quick way to raise donations for charity and get people engaged right away. 

By tapping into these funding sources, you’ll create a strong, sustainable financial model for your nonprofit. Diversifying your revenue streams means more stability and more opportunities! 

Planned Giving 

This advanced fundraising technique lets donors commit to contributing in the future, often through bequests, retirement funds, or life insurance.  

For example, a donor might include your nonprofit in their will, directing a portion of their estate to your cause. Or, they could designate your organization as a beneficiary of their life insurance policy. Some donors might also choose to contribute part of their retirement funds, like an IRA or 401(k). These types of gifts ensure ongoing support for years to come and allow your donors to leave a meaningful legacy. 

Planned gifts are significantly larger than annual donations. A typical planned gift is 200 to 300 times the size of a donor’s largest annual gift. Also, bequests are the most common form of planned giving and have shown resilience, with a 4.8% increase in the previous year, totaling over $42.68 billion. 

By offering options like legacy donations, you show them how their contribution can live on, making them feel connected to your cause for years to come.

Recurring Donations 

Want a steady stream of funding? Focus on recurring donations! Instead of relying on one-time gifts, recurring donations create reliable income over time. 

The average donor retention rate for nonprofits is approximately 50%, meaning half of the donor base may need to be replaced every year. 

Nonprofit organizations often focus on keeping their current donors because attracting new ones can be expensive. It can take up to 2 years to recover the costs of recruiting a first-time donor, as initial donations are usually smaller than the marketing expenses.  

So, offer donors the option to set up monthly or yearly donations. This gives them an easy way to stay involved while providing your organization with predictable support. Make it simple to sign up and track their contributions.  

By securing recurring donations, you build a foundation for the future.