How to Assess Grant Readiness for a New Nonprofit

The Grant Readiness Question Every New Nonprofit Faces

You have just received your 501(c)(3) determination letter, filed your articles of incorporation, and assembled an enthusiastic board of directors. Grant funding seems like the natural next step to launch your programs. But are you actually ready? The honest answer for many new nonprofits is "not yet," and understanding what you need to put in place before applying can save you months of frustration and rejected applications.

The GrantCraft Readiness Checklist is specifically designed to help organizations answer this question. It evaluates your readiness across multiple dimensions, from legal infrastructure to financial systems to programmatic capacity. For new nonprofits, this assessment is especially valuable because it identifies gaps that are common in organizations that are less than two years old.

Legal and Tax Foundation

The checklist begins with your legal infrastructure, which is the most fundamental requirement for grant eligibility. For a new nonprofit, this includes:

501(c)(3) Status

Most funders require IRS tax-exempt status. If you have applied but not yet received your determination letter, you may still be able to apply for some grants, but your options will be limited. Some foundations accept organizations with pending applications, and others will allow you to apply through a fiscal sponsor.

Fiscal Sponsorship as an Alternative

If your 501(c)(3) status is not yet approved, or if you are a project that does not intend to incorporate separately, fiscal sponsorship allows you to receive grants through an established nonprofit. The checklist prompts you to consider whether fiscal sponsorship is appropriate for your situation and what to look for in a fiscal sponsor.

State Registration

Many states require nonprofits to register before soliciting charitable contributions. The checklist asks about your state registration status and any state-specific compliance requirements.

Federal Registrations

If you plan to pursue federal grants, you need a Unique Entity Identifier from SAM.gov and an active Grants.gov account. These registrations can take several weeks to process, so begin early. The checklist flags these requirements so you can start the registration process well before you plan to apply.

Governance Assessment

The checklist evaluates your board of directors, which is a critical factor in grant readiness. Funders look for boards that are active, diverse, and engaged in organizational oversight. For new nonprofits, common governance gaps include:

Board size: Many new nonprofits start with the minimum number of board members required by state law, often three. Funders prefer boards of seven or more members with diverse professional expertise.
Board engagement: Regular meetings, documented minutes, and active participation in fundraising are baseline expectations.
Governance documents: Bylaws, conflict of interest policies, and whistleblower policies should be in place before you apply for grants.
Board giving: Many funders ask whether 100 percent of board members contribute financially. The amount is less important than the commitment.

Building a strong board takes time, and the checklist helps you identify specific governance areas that need development. For more on demonstrating organizational capacity, see our guide on organizational capacity and partnerships.

Financial Systems Assessment

The financial systems section of the checklist is where many new nonprofits discover they are not ready. Grant management requires financial infrastructure that goes beyond a basic checking account and a spreadsheet. The checklist evaluates:

Accounting Software

You need accounting software that can track income and expenses by program and by funding source. This is essential for grant compliance because funders require you to show exactly how their money was spent. QuickBooks, Wave, or Aplos are common options for small nonprofits.

Internal Controls

Funders want to see that you have safeguards to prevent misuse of funds. Basic internal controls include separation of check-signing authority from bookkeeping, a written purchasing policy, and board approval of expenditures above a certain threshold.

Financial Statements

Most funders require at least one year of financial statements, and many require audited financials. If you are less than a year old, this can be a barrier. Consider having a CPA prepare reviewed or compiled financial statements, which are less expensive than a full audit but more credible than internal statements.

Budget

A board-approved annual budget is a basic requirement for most grant applications. Your budget should show all revenue sources and expenses, organized by program and function. The checklist prompts you to ensure this document exists and is current.

Programmatic Readiness

The checklist assesses whether your programs are developed enough to describe in a grant proposal. New nonprofits often have a vision for their programs but have not yet worked out the operational details that funders require. The checklist asks:

Do you have a written program description with specific activities, target population, and expected outcomes?
Do you have any program data, even pilot data, demonstrating effectiveness?
Do you have the staff or partnerships needed to deliver the proposed program?
Have you served any participants yet, and can you document the results?

If you cannot answer most of these questions affirmatively, consider conducting a small pilot program before applying for grants. Even a modest pilot with a few dozen participants gives you data and experience that significantly strengthen a grant application.

Creating a Grant Readiness Timeline

The checklist results give you a roadmap for building readiness. For a typical new nonprofit, here is a realistic timeline:

Months 1 through 3: Legal and Governance Foundation

File for 501(c)(3) status, adopt bylaws and policies, recruit additional board members, and begin SAM.gov registration if pursuing federal grants.

Months 3 through 6: Financial Infrastructure

Implement accounting software, establish internal controls, create a board-approved budget, and develop written financial policies.

Months 6 through 12: Programmatic Development

Launch a pilot program, begin collecting data, build community partnerships, and document your activities and outcomes.

Months 9 through 12: First Grant Applications

With a year of organizational history, basic financial statements, and pilot program data, you are ready to apply for smaller foundation grants. Start with local community foundations and family foundations that specifically support new organizations.

Using GrantCraft's Other Tools to Build Readiness

While building organizational readiness, familiarize yourself with the other GrantCraft tools you will use when you are ready to apply. The Funder Directory helps you identify appropriate funders for new organizations. The Templates give you a preview of what a complete proposal looks like. The Proposal Builder will guide you through the actual writing process when the time comes. And the Tips section provides advice that applies even before you start writing, helping you understand what funders value.

For a comprehensive understanding of the grant landscape that new nonprofits must navigate, read our guide on the grant landscape and ethical foundations.

New Nonprofit Readiness Milestones

Obtain 501(c)(3) status or establish a fiscal sponsorship arrangement.
Build a board of at least seven members with diverse expertise and 100 percent giving participation.
Implement accounting software with fund-level tracking capability.
Establish written financial policies and basic internal controls.
Create a board-approved annual budget.
Conduct a pilot program and document outcomes.
Prepare at least one year of financial statements reviewed by a CPA.
Complete the GrantCraft Readiness Checklist before submitting your first application.

Learn more about grant writing strategies at Subthesis.

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