Sponsors vs Grantors

Dear Erin,

Thought I’d jot down a few things we talked about the other day with regard to how institutions contribute financially to nonprofits.

Grantors are organizations that provide a donation to nonprofits in the form of a grant. The grant is either unrestricted, meaning you can use it for whatever operating expenses you may have, or it is restricted for a specific program or use. Typically, but not always, you apply for a grant, and there may be some restrictions as to how you use it or what you need to do to recognize the grantor. Most often, you’ll have to provide a grant report at the end of the period (the fiscal year or the length of the project) that hey specifically funded. You’ll want to acknowledge the grantor (sometimes called the funder), publicly either on your website, in your social media or perhaps your program book, unless they ask to be anonymous.

Most grantors can only fund 501(c)(3) organizations.

Sponsors are providing you money in exchange for some benefit to them, typically promotional. Usually, a sponsor is a company that wants access to your audience or following. You are familiar with a sponsored athlete or a sponsored Instagram post. The company is providing money it considers marketing or advertising dollars to associate itself with you and your work, so that people who like you will hopefully see their name and logo and like them, too.

Sponsors can finance nonprofits, other companies, influences, individuals - anything, really. To get a sponsor, you must convince the company that there is a promotional benefit to them and that they will get a return on their investment, usually meaning they will get better brand awareness and more customers. You’ll need to prove to the sponsor that your audience is the audience they want, and you’ll need to prove that your work is very much in front of that audience - either by counting “eyeballs” on your social media and other advertising or by participation, I.e., number of people at your shows or watching your videos.

Grantors are giving you money to advance their own mission of doing good in the world, usually because your mission is in line with theirs. Sponsors are giving you money to help their own marketing, because your audience is similar to theirs, or is similar to the audience they want. Grantors often have tax advantages with respect to their grant-giving; sponsors treat their sponsorship dollars as any other marketing expense. The tax vs expense issue is not your concern. However, when working with a sponsor, it is customary to send them an invoice. For grantors, it is the other way around: you apply for funds and they tell you how much they are going to give you.

That’s the gist. There is a lot more to say once we get talking about soliciting sponsors and building relationships with grantors or applying for grants. Save that for later; for now, remember that sponsors want your audience and want to associate themselves with you for marketing reasons while grantors want to help further your work and your mission, because it is aligned to theirs. For sponsors, you must prove audience. For grantors you must prove impact.

Here’s to you building both!

Love, Mom