How nonprofits can take advantage of corporate support, Part I

Nonprofits need to understand the rules governing corporate sponsorship.
Date Published
12/06/2013

With a growing number of nonprofit fundraising initiatives, organizations are looking to corporate support and sponsorships to help develop a sustainable path forward. These are relationships that are mutually beneficial for nonprofit groups and the corporate entities that support them. However, earning these sponsorships requires thoughtful planning, as well as understanding of many of the regulations that govern these agreements.

What should nonprofits know first?
Initially, a charitable organization must understand the role of corporate support. According to the National Council of Nonprofits, a corporate sponsorship is essentially financial support given to a nonprofit organization by a business in an effort to give aid to its mission. The main caveat here is the business must be recognized for its financial payment and how this money goes to further a nonprofit through its projects or special programs. The Chicago-based law firm Barnes & Thornburg indicated this is how it’s distinguishable from standard charitable giving, during which a contributor doesn’t require any recognition of giving financial support. With a corporate sponsorship, it’s expected the nonprofit organization will publicly thank the business, whether this is through an announcement over the radio, a banner or even saying thanks at a public event.

What are nonprofits not allowed to do?
While it’s perfectly fine for a philanthropic organization to publicly show their gratitude, it should refrain from giving any sort of “qualitative judgment on the corporate sponsor’s products or services,” according to the law firm. The legal group recommended nonprofit organizations write their own thank you scripts to avoid this situation. In addition, charitable groups cannot ask members, donors or any members of the public to purchase a product or service the business provides. If a nonprofit group does so, it will have the tax-free status of the corporate sponsorship taken away, which reduces the impact of the financial support. One simple and convenient way for a nonprofit to thank corporate sponsors – and avoid many of the problems associated with endorsements – is posting their gratitude online through their organization’s website. In this way, the nonprofit has control over what language is used and how much information is disseminated.

What beginning steps should nonprofits take to identify a good corporate sponsor?
Here’s where planning is a key ingredient. According to The Fundraising Authority, a website dedicated to helping nonprofits fund their missions, it’s important for groups to research and locate corporations with common guiding principles. For instance, it wouldn’t make sense for a nonprofit group that advocates for the rights of victims of violence to partner with a business that manufactures firearms for a campaign. Instead, nonprofit groups should look for common ground with potential business partners so that each party can raise awareness for a shared cause. Joe Garecht, founder of The Fundraising Authority, advised nonprofits leverage the connections of board members. Frequently, these individuals come from a business background and may have colleagues who would be interested in supporting a project or program.

The road to cultivating corporate sponsorships requires sufficient research and understanding of what the nonprofit aims to accomplish and how a business can help in support of these initiatives. There are many more steps that nonprofit management professionals can take to achieve their goals.

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