A Short Guide to Crowdfunding for Nonprofits & Charities

In recent years, crowdfunding has grown in popularity as a way of raising money for personal expenses, funding creative projects and launching new products. It’s a method of fundraising that has seemingly limitless potential.

At Addition Financial, we’ve been getting a new question from our nonprofit members:

"Can I use crowdfunding to raise money for my organization?"

That’s a great question. The short answer is yes, but of course there’s more to the topic than that. We’ve put together this short guide to crowdfunding for nonprofits to help you out.

Choose the Right Platform

The first step is to choose the right crowdfunding platform for your goals. Some platforms handle nonprofit crowdfunding and others don’t. You can start with this list as you narrow your search.

Of course, there are other considerations as well:

  1. What is the base fee charged by each platform?
  2. What are the platforms goal requirements? For example, some crowdfunding sites charge more if you don’t meet your goal. Others may not give you access to the funds pledged unless you meet your goal. Make sure you know what you’re getting into before you commit.
  3. What tools, if any, does the platform provide to help you meet your goal? Examples might include email templates and social sharing tools.

We recommend doing a point-by-point comparison before you choose a platform.

Set Achievable Goals

The next step is to decide how much you want to raise and why you want to raise it. Crowdfunding is most successful when potential donors get excited about what their money will do. It’s your job to create a campaign that will generate enthusiasm and make people want to get involved.

Your goals should include:

  • How much you want to raise
  • When you need the money
  • Start and end dates of your campaign
  • Your target audience

Be specific. The more clearly you define your goals internally, the better able you’ll be to define them to your audience.

Involve Your Current Supporters

You’ll want to attract new donors and supporters with your crowdfunding campaign, of course. But that doesn’t mean you don’t need your existing supporters to help you out, both with donations and with getting the word out about your campaign. You’ll need to get them excited and make it easy for them to spread the word.

Here are some suggestions:

  • Create articles, blog posts, images and videos for them to share on social media.
  • Provide regular updates on your progress.
  • Make a schedule to encourage sharing and participation.

In other words, you want to make it as simple and intuitive as possible for your existing audience and new donors to share your campaign and get their friends and family involved.

Be Transparent about Donations

When people use crowdfunding for films and other creative projects, they usually provide incentives for donations at different levels. You can use the same principle, but instead of giving rewards, you should specify how donations will be used. This has the benefit of making donors feel a personal connection to the work your organization is doing while also ensuring transparency in your campaign.

Here’s an example. If your organization raises money to feed the hungry, you might break down your campaign like this:

  • A $10 donation provides lunch for a family for one week.
  • A $50 donation feeds an entire family for one week.
  • A $100 donation feeds an entire family for one month.

You get the idea. You should feel free to get creative with your ideas and provide photos to accompany each donation level. Remember that potential donors are more likely to get involved if you provide them with a wide array of donation options.

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Understand Your Legal Obligations

Online crowdfunding comes with some special challenges for nonprofit organizations, and they include a host of legal and financial obligations. For example, 39 states require nonprofit organization to register in their state before accepting donations from its residents.

That’s complicated with nonprofit crowdfunding because you might operate in California and choose a crowdfunding platform in New York. Through social sharing, your campaign could potentially reach donors in all 50 states.

It’s a lot to figure out, but the National Association of State Charity Officials has created a publication that summarizes the rules. We recommend reading through them and taking the necessary steps to ensure you’re not violating any federal or state regulations with your crowdfunding campaign.

If you handle your campaign properly, a crowdfunding campaign can help your nonprofit organization raise funds quickly while expanding your donor base. The guidelines we’ve included here will help.

To learn about Addition Financial’s nonprofit checking accounts, please click here now.

The content provided here is not legal, tax, accounting, financial or investment advice. Please consult with legal, tax, accounting, financial or investment professionals based on your specific needs or questions you may have. We do not make any guarantees as to accuracy or completeness of this information, do not support any third-party companies, products, or services described here, and take no liability or legal obligations for your use of this information.