Nothing’s impossible, of course; however, one of the more common requirements from funders is that organisations applying for grants have at least one year’s financial accounts to present with their bid.
In the first year of a charitable organisation, it’s likely that costs will be incurred, e.g. fees associated with the set up of the charity, subscriptions and management fees, the accountancy bill, staff costs, etc. Getting past this first year will be testament to your organisation’s foundations, and any financial support that can be won will be very welcome indeed.
At the same time, it’s understandable that grant-making bodies require some evidence of good money management, and a sign that the cause has other support than just the bid being considered. Just like a bank would need to see similar credentials when considering whether to lend someone money, funders have to take reasonable steps to ensure their monetary gifts won’t be squandered.
It’s a chicken and egg situation.
The better-prepared charities will likely have raised funds before they seek grant monies from funding organisations—through face-to-face fundraising events with the general public, through warm relationships with private donors and businesses, etc. To register with the Charity Commission as a new charity, you need to demonstrate that your good causes’ income will be above £5,000 annually. This doesn’t mean that you have to wait until you have £5k in your charity’s bank account before registering with the Commission, just that you need to show your plans as to how you will raise this amount (the more concrete evidence of this, the better).
If you’re wondering why your new charity needs to be registered with the Commission, it doesn’t—at least, not straightaway. You can raise money as an unregistered organisation, as long as you make it clear to those donating the status of your charity/group. When you tip over this £5k turnover, however, you must register with the Commission. CIOs (Charitable Incorporated Organisations) must register with the Commission, regardless of their income.
If your organisation’s income is below £5k, you can still claim Gift Aid on donations; however, registering with the HMRC is required to carry out this process.
New charities, though they may not be able to show formal accounts to a grant-maker, will likely be able to demonstrate the funding activity that occurred before they formally registered the organisation. If you have a relationship with a grant-maker, they may be happy to accept this evidence in lieu of your first year’s accounts; however, if you’re applying to an unfamiliar grant-maker, this may not be the case. It’s not as if grant-makers are struggling to distribute their funds at the moment—quite the opposite. Even if they like your particular story and brand of support, they’ll likely have a number of other good causes who do have a year’s accounts and as much potential to support.
It will be clear in a fund’s criteria if a grant-maker requires a year’s accounts; some may actively wish to support grass root organisations looking to get off the ground, and these are the ones you should apply to during the early days. Every grant-maker is different. Every fund has its own unique criteria and restrictions.
It’s not just beneficial to your accounts to be asking the general public for funds from the get go, it will also raise your profile in your local community—amongst new donors and potential beneficiaries. If you’ve launched a charity in the hope that all your income will come from trusts and foundations, you may find your progress very difficult indeed.
It’s true that launching a successful charity is hard; however, with a good strategy, that first year will fly by. If you aim to diversify your efforts and take advantage of all avenues of income, life will be much easier.
Should you need a reminder, income to your charity could come from all of the following:
Your local council/ward
Individual giving/donations, e.g. one-off donations or regular monthly gifts
Gifts In wills, i.e. legacies
Businesses, through their CSR—as gifts, sponsorships, charity of the year, payroll giving, etc.
Trusts and foundations
Income from the sale of charity merchandise/products
Ticket sales to a charity event
The sale of NFTs
Raffles, tombolas and auctions
Selling items on behalf of individuals and keeping the profit/a percentage of the sale
Gift Aid on donations
Sponsoring the care of an animal (relative to animal care charities, for example)
Donations as payment for services, e.g. bag packing, car washing, gardening
Having members of the public carry out endurance feats, marathons, etc. on your charity’s behalf, whilst being sponsored
Just focusing on any one of them is a narrow view, as many can be done simultaneously.
If you’d like help to form a strategy for your first year, to register your charity or support to explore any of the above funding routes, get in touch with me at email@example.com or call 0114 350 3354.