Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Are you determined to do some good in the world for a cause you are passionate about? Forming a non-governmental organization or NGO may be a potential avenue for you to achieve those goals.Let’s take a look at the role NGOs play in society and the advice you may want to consider if you decide an NGO fits with your objectives.
What is an NGO?
The term NGO was first used back in 1945 when the United Nations was formed. There is no formal definition, but generally NGOs are thought of as nonprofit entities that support humanitarianism and the public good. They are independent from any government but may receive government funding. NGOs can be local, national, or international in scope.
How Do NGOs Work?
NGOs are usually set up to serve a social goal such as human rights advocacy, protecting the environment, health care, education, support of the poor, or reducing violence, to name just a few examples. Some household name NGOs include Salvation Army and American Red Cross.NGOs run on many types of funding, including private donations, dues, and government grants. There are two types of NGOs. Operational NGOs focus on designing and executive development projects while Advocacy NGOs promote a specific cause or public policy. Many NGOs are considered part of both categories at the same time.In the United States, NGOs are regulated and must file returns that detail funding, management and activities.While no laws state that NGOs cannot receive loans, since the probability of repayment is low, securing business finance is challenging.
Are NGOs the Same as Nonprofits?
Yes and no. Most NGOs are nonprofits, but many nonprofit organizations are not considered NGOs. NGOs are usually focused on promoting social welfare or the public good. Many nonprofits may be focused on those goals as well. But many others may be involved in the arts, or science, commerce or research, with professional goals, and thus would not be considered an NGO.
7 Steps to Start an NGO
If you’re interested in making a change and positively impacting the world, starting an NGO may help you achieve your goal. These steps can help.
Step #1: Figuring Out Your Goal
The first step in starting a successful NGO is to clearly identify what cause you are passionate about and what goals you hope to achieve to promote that cause. From there you can determine how much need there is for your NGO. There may be dozens of NGOs already working in the area you are interested in that may need your support. Or you may find few organizations are addressing your cause directly. Ideally you want to be filling a gap in the current NGO market.If you haven’t already, be sure to work or volunteer for an NGO in a related area to gain knowledge and experience before starting your own. This will also help you find potential team and board members for your organization. (More on that below.)And, consider taking one of the many free NGO courses available online to better understand NGO structure, governance and other key concepts.
Step #2: Create a Plan
Creating a plan for your NGO helps you clarify your vision and goals so you’ll be successful. In your plan you’ll explain the purpose and goals of your organization. These need to be realistic and achievable.Work for world peace isn’t something that one NGO can handle on its own.Your plan should include a specific vision statement, a list of goals and the steps you’ll take to achieve them. This statement is key because it will likely be the backbone of your website and fundraising efforts.Your vision statement and overall plan should reflect the research you’ve done on the challenges, history, politics and other factors that are related to and impact the cause you’re supporting and the actions you’ll be taking.
Step #3: Recruit Your Board of Directors
Surrounding yourself with experts on accounting, fundraising, management, marketing, technology, and other areas is key to running a successful NGO. That’s where your board of directors comes in. You want a team that shares your vision and will provide the expertise you’ll need to make that vision come true. Having a board is also a vital element for registering and running a nonprofit organization.
Step #4: Register Your NGO
To make your NGO legal, you’ll need to register. Applications usually require basic information such as name, purpose, board members and organizational structure. You also may find drafting Articles of Incorporation and Bylaws a necessary part of registration. And this may also be a good time to get any necessary permits and/or licenses you need to operate.
Step #5: File for Tax Exempt Status
Because NGOs are by definition nonprofit organizations, they almost always qualify for federal and state tax exempt status. In addition, many NGOs qualify for 501(c)(3) status, which allows donors to take their contribution as a tax deduction.Applying for tax exempt and 501(c)(3) status via the IRS can involve some time and paperwork (your legal counsel can help). And in some states, you’ll need to be registered with a state charity official. For instructions and guidelines check out the IRS website.If you’re not ready to file for tax exempt status yet, consider asking an established NGO to sponsor you under its umbrella. Tax deductible donations and grants go to your host, care of your NGO. You receive the funds and your donors are still able to get the tax write off.
Step #7: Develop a Great Website
A compelling, inviting website is one of the best ways to convey your mission and attract donors. Don’t skimp on a good designer and a seamless user experience. This will be the place you send anyone you and your staff encounter to learn more about your NGO and potentially contribute.
Step #8: Create a Budget
Your mission is solid, your paperwork is done. Now it’s time to figure out how much money you will need to fund your projects, operations, staff salaries and other overhead costs.NGOs are often fueled by volunteer workers, but that doesn’t mean you won’t need a solid operating budget to manage those volunteers. In fact, many NGOs have budgets in the millions, even billions of dollars. Understanding exactly how much money you’ll need to keep the doors open, manage volunteers and continue to fundraise is vital to making your NGO successful.Recommended:Guide to Crowdfunding for Startups and Businesses
Getting Funds for Your NGO
Once you’ve got that budget settled, it’s time to raise the money you need so you can execute your plan.NGOs are funded in a variety of ways, from crowdfunding for donations to sales of goods and services. Which method or combination of methods you use will depend on your vision, structure, and reach. Here’s a look at the various funding options. You may find you use one, several, or even all of these methods to fund your NGO.
Grants
You can explore foundations that award grants to help fund your NGO.
Private donations
Whether it’s from individuals or other charitable organizations, donations can be large gifts from an established foundation or a large collection of small private donations.
Government funding
Many NGOs receive government funding but are still able to retain their independent status.Recommended:What to Know About Microloans
The Takeaway
NGOs come in basically two flavors. Operational NGOS focus on development projects and Advocacy NGOS promote causes. They are funded by a variety of sources including government funding, even though they are independent of governments. Starting an NGO can be one of the best ways to help society as long as you’ve done plenty of research and developed a solid plan.
3 Small Business Loan Tips
Generally, it can be easier for entrepreneurs starting out to qualify for a loan from an online lender than from a traditional lender. Lantern by SoFi’s single application makes it easy to find a small business loan offer from a lender.
If you are launching a new business or your business is young, lenders will consider your personal credit score. Eventually, though, you’ll want to establish your business credit.
Traditionally, lenders like to see a business that’s at least two years old when considering a small business loan.
Frequently Asked Questions
How can you create an NGO?
What are the differences between NGOs and nonprofits?
How are NGOs funded?
Photo credit: iStock/SDI Productions
LCSB0123001
About the Author
Walecia Konrad
Walecia Konrad is an award-winning financial journalist with 25 years of experience in print and digital media. She is a graduate of Syracuse University and specializes in the topics of health care, personal finance, and employer-sponsored benefits. Konrad's work has been seen on CBS MoneyWatch, The New York Times, Money, SmartMoney, BusinessWeek, and Forbes. She has been the recipient of both a Pearl Award for Best Web Publication of the Year and a National Magazine Award for Personal Service.
