When embarking on a building project, one of your primary goals should be to determine: “How are we going to fund it?” While philanthropy is often considered the main source, there are multiple ways to secure the necessary funds. We always remind our clients that “your project budget and your fundraising goal are rarely the same thing.” This article will explore various funding sources, emphasizing the importance of comprehensive financial planning to help you raise enough funds for your project.
Understanding Your Funding Options
Reserves: One of the first places to look for funding is your organization's reserves—funds saved for significant projects. Assessing whether to use these reserves depends on your organization's financial stability and future needs. Using reserves can be a smart move, especially if you have been saving specifically for a project like this. A key question to ask is: Are we financially secure enough to use reserves without jeopardizing our organization's future?
Endowment Funds: Endowments are assets, typically cash accounts invested in equities, bonds, or other investment vehicles, set aside so the original assets (the “corpus”) grow over time through earned interest. The income generated from endowments is often intended to finance a portion of the operating or capital requirements of the institution. A key question to ask is: What is the stated purpose of the endowment?
Government Support: Government funding is another valuable resource. Depending on your project's nature, there may be state, federal, or local funds available. Researching and applying for these grants can provide substantial financial support. It’s essential to understand the criteria and application processes for these funds to maximize your chances of receiving aid. A key question to ask is: What are the requirements or contract terms of this particular opportunity?
Financing: Taking out a loan or mortgage is not always a negative option. Financing can be an effective way to manage large expenses over time, whether it's a short-term bridge loan during construction or a long-term mortgage. Borrowing can provide the necessary funds without depleting your reserves. Evaluate current interest rates and your organization's ability to repay the loan before proceeding. A key question to ask is: What are the terms, and can your organization manage the repayments?
Philanthropy: Philanthropy is a significant source of funding for many projects but should be part of a larger financial strategy rather than the sole source. Fundraising efforts can supplement money taken from reserves, government support, and financing. Engaging your community and supporters in your vision can generate substantial contributions. A key question to ask is: How much can you realistically raise through current and prospective donors?
Crafting a Comprehensive Financial Plan
It’s vital to recognize that your project budget is not synonymous with your fundraising goal. A robust financial plan considers various funding sources and how they integrate to support your project. Here are some steps to create an effective financial strategy:
Assemble a Financial Team Gather the smartest financial minds you know to help develop your funding plan. This team can help run different financial scenarios and models to determine the best approach. They will assist in answering critical questions, such as:
At what points in our campaign timeline do we need the money?
How much are we willing to use from our reserves?
Can we comfortably borrow money, and can we repay it at current interest rates?
If your current team or board lacks the necessary expertise, form a financial committee. This committee can include community members with financial knowledge who can offer valuable insights and support. Engaging the community not only helps in planning but also builds broader support for your project.
Funding a building project requires a multifaceted approach and thorough financial planning. By exploring various funding sources and assembling a knowledgeable financial team, you can develop a strategy that ensures the success of your project. A well-rounded plan that includes reserves, government support, financing, and philanthropy will position your project for long-term success. Engaging the right people and exploring all possible funding sources can turn your vision into reality. Start planning today to ensure a bright future for your project!
Frances Roen is a Georgia girl at heart, and has been graciously adopted by beautiful, snowy Minnesota. She is a forty-something daughter, friend, mom, wife, and entrepreneur, and is always on the look-out for a perfectly fried piece of chicken.
Frances is a Certified Fundraising Executive (CFRE) with nearly 20 years of experience fundraising and has raised over $200M for nonprofits. She has held fundraising positions at The Bakken Museum, Augustana Care Corporation, and YouthLink and consulted with dozens of nonprofits clients across the globe. In these roles she has been responsible for all aspects of fundraising including comprehensive campaigns, major and planned gifts, annual funds, events, communications, corporate partnerships and volunteers.
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