Grant writing is one of those elements of nonprofit management that you don't want to get wrong. It takes time to develop and submit grant applications, and you need to make sure that the investment is worth the return. One of the most common scenarios that I come across is nonprofit organizations that rush into grant writing.
To be completely upfront, your organization can exist as a nonprofit without a 501(c)(3) designation from the IRS. The terms nonprofit and 501(c)(3) are not interchangeable. To learn more, click here. A nonprofit organization that does not intend to accept charitable donations can exist forever without a 501(c)(3) designation. But as soon as you want to start accepting donations and providing donors with a receipt for tax write-offs, you'll need to take the plunge.
Besides the tax exemption status and the ability to provide donors with tax receipts, having this designation from the IRS opens the door to grant funding. To apply for any federal, state, or local grants, you'll need to have your IRS determination in-hand at the time of submission. Most private and corporate foundations also require proof of your IRS status at the time of application. In my 15 years of experience, I do not recall ever finding a private or corporate foundation that would award a grant to a nonprofit that did not have a 501(c)(3) designation from the IRS.
That said, there is a work-around. If your organization has a pending application for IRS determination or is in the process of submitting it, you could work with a fiscal sponsor. A fiscal sponsor is an established nonprofit with an IRS designation that accepts fiduciary oversight, financial management, and some administrative functions of managing a grant on behalf of both organizations. In simplest terms, this organization accepts the gift on behalf of the nonprofit without the IRS designation and agrees to maintain control over the funds.
But you don't want to just jump at any nonprofit willing to put their name next to yours. Consider this a committed relationship. Do your homework and find an organization that fits with your mission and build a strong foundation for a positive outcome for both the grant management and the long-term success of your nonprofit.