Grantmaking Basics: Creating Grant Guidelines

It’s not always easy for grantseekers to understand how foundations work or how to access them. Grant guidelines are a great way to communicate your interests and strategies to potential grantees, making it clear what you fund and how to apply. The clearer your guidelines, the more likely you are to receive grant applications that align with your interests.

This will save you time in screening and responding to unsuitable proposals and provide a consistent framework for evaluating the ones that do fit. Similarly, applicants will avoid wasting time on foundations that are not a good match. Remember, though, these are just guidelines. If you want to make a grant outside of those stated guidelines, you can certainly do so.

What to Include in Your Grant Guidelines

Mission, Vision, and Values

What are the goals that guide your giving? How does your foundation want the world to be different because of its work?

Brief History of the Foundation

Help grantseekers understand what motivates you—whether it’s a donor’s legacy, roots in a community, or another event or experience. What aspects of the foundation’s history shape its interests today?

Program Interests

What are your broad interest areas (e.g., education, social justice) if not defined in your mission? Have you identified a niche within those areas? Talk with community leaders, nonprofits, or your local community foundation to identify unmet needs and ways your foundation can add value.

Geographic Focus

If your mission doesn’t specify a geographic focus, consider this: Foundations with a narrow focus might not need geographic limits, but those targeting a specific community or region should clearly state it. Being specific will help reduce ineligible grant proposals.

Grant Restrictions

This is where you say who and what you do not fund. Consider these restrictions:

• Type of organization—It’s common for foundations to say they only make grants to 501(c)(3) public charities. They do so to avoid the additional requirements that might be necessary if funding other organizations. In most cases, it is better to phrase the restriction as giving only to public charities with a 509(a)(1) or (2) designation or to governmental agencies. Currently, these are the only charitable organizations that require minimal paperwork.
• Size of organization—Some foundations limit their giving to organizations below a particular annual operating budget. They believe they will have greater impact when partnering with smaller organizations.
• Funding uses—Some foundations choose to not fund individuals, fundraising drives, religious activities, or litigation, for example. Do certain funding uses not match your foundation’s goals?
• Repeat grantees—Some foundations fund the same organizations year after year. Others seek new organizations and programs after a few years or require grantees to take a year off before reapplying for funding. Find an approach that best fits your overall strategy.
• Unsolicited proposals—If your foundation does not fund unsolicited proposals but prefers instead to fund those it identifies, state that clearly. Nevertheless, grant guidelines are helpful in educating the grantees you do invite to apply.

Getting Proposals Underway

When a foundation initiates a grant proposal, it takes on the responsibility of finding the best organizations and programs to support its mission. This works well for foundations with a clear focus and knowledge of their funding area, or those willing to learn. While this approach helps control the number of proposals, the foundation might miss out on some great ideas. Some foundations do most of their grantmaking proactively but set aside a small portion of funds for other ideas.

When grantseekers initiate the proposal process, it’s up to them to connect with the foundation. Depending on how well you publicize your guidelines, grantseekers might know little about your funding priorities. This open-door approach can attract proposals from outside your usual pool, which is helpful if your foundation is new or exploring a new area of interest.

Grant Types

Foundations often tend toward one or two grant types, awarding other types as circumstances warrant. For example, if you’re interested in shoring up young organizations in your community, you might offer a series of general operating support grants to stabilize those organizations. If you’re interested in expanding affordable housing, you might consider loans, loan guarantees, or another form of program related investment (PRI).

Consider the following grant types:

• General operating support—This type allows a grantee to decide how funds are used, although most foundations and grantees have conversations about expectations and intended outcomes.
• Capacity building grant—This grant type funds core organizational skills and capabilities, such as leadership, fundraising, and management.
• Project support grant—This type of grant funds a particular program or project.
• Scholarship—A scholarship typically funds individuals for a particular purpose, usually for travel or study, and requires special Internal Revenue Service approval, unless a third party selects the grant recipients.
• Seed grant—This type provides start-up funds for a new organization or program.
• Challenge/matching grant—This grant type provides funds with the expectation (or on the condition) that additional funds are raised from other sources.
• PRI—This is a loan, loan guarantee, or other investment that offers a return either through repayment or return on equity.
• Capital grant—A capital grant funds the purchase or construction of a building, land, or major equipment.
• Endowment fund—This type builds an organization’s endowment and helps it achieve financial stability.
• Innovation grant—This grant type funds projects that experiment with new solutions to social problems. Innovation grants are key roles for foundations because few organizations have the same luxury of funding projects perceived to be risky.

Grant Sizes

Foundations give grants of all sizes. Consider how grant size fits into your overall grantmaking strategy:

• What are the needs of your community? Will a few large grants have a greater impact than several small ones? If your foundation funds in a new area or one with only a few effective organizations, or both, a few large grants may be the right fit.
• What is the best grant size considering the foundation’s resources and time? Many small grants may take more time to review, administer, and monitor than a few large ones. In addition, for grantees you intend to fund over time, larger multiyear grants can significantly reduce the administrative burden for you and the grantee organizations.

Note: Large grants to small public charities can force or “tip” the public charity into private foundation status—a disservice for most public charities.

How to Apply

Foundations differ in how much information they require from grant applicants—sometimes just a letter or email. Since there are few legal requirements for simple grants besides knowing a grantee’s tax status, your foundation has a lot of flexibility in deciding what to ask for. Instead of assuming that more documentation leads to better grants, consider asking only for what you need to see if a grant fits your strategy. Be specific about your requirements, even setting a page limit.

If your funding strategy is specialized, you might consider accepting a common grant application used by other foundations in your area. Check if grantees find this local application helpful. You might also think about accepting applications electronically, either through downloadable forms that applicants can email or online submission forms.

Many foundations use a screening process to quickly determine if there’s a potential fit. Only organizations that are likely to receive a grant submit a full proposal. For example, your foundation could ask for a one- to two-page letter of inquiry that outlines the organization’s mission, requested amount, program details, needs to be addressed, and intended outcomes.

Contact Person

Publicizing Your Grant Guidelines

Make your guidelines easily accessible to grantseekers through sources like:

• Foundation directories
• A one- or two-page information sheet (print and electronic)
• A small brochure about the foundation
• The foundation’s website
• An annual report

You can even use your voicemail to share basic requirements and direct applicants to your full guidelines. If you’re interested in a particular organization, you can send your guidelines directly to them.

Katy Pugh Smith from Piedmont Healthcare Foundation in Georgia noted that having a website has simplified things for their lean foundation. They used to mail brochures and handle many phone inquiries, but now they just email a link to their website.

A website is a particularly effective way to share your guidelines. It’s also a good place to feature recent grants and your foundation’s annual tax reporting form (Form 990 or Form 990-PF).

Letting the Public Know You Give Grants

Here are some ideas for foundations—whether new or established—looking to expand their program areas or attract more grantseekers:

• Share your mission and guidelines on your website or at local nonprofit events.
• Connect with other foundations that share similar interests; they might refer grantees to you.
• Check if your regional association of grantmakers has a funder directory.
• Update your mission, guidelines, and recent grants with Candid’s Foundation Directory.
• Invite nonprofits to meet with you and discuss their programs.
• Issue a request for proposals (RFP) to outline your project vision and invite organizations to apply. You can send the RFP to local nonprofits or advertise it in a newspaper or online.
• Host events where potential grantees can learn about your interests and ask questions.

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