Breaking the Cycle: How Nonprofits Can Earn and Sustain Unrestricted Funding
How Nonprofits Can Earn and Sustain Unrestricted Funding
It’s a familiar story: a nonprofit lands a grant, and everyone breathes a sigh of relief. Programs stay afloat, staff get paid. The grant, however, like so many before it, comes with strings: it must be spent of donor-prescribed activities. Sufficient money for programs, little, if any, for rent, payroll and technology. Leaders celebrate the win as they scramble to cover the costs of keeping the lights on.
This is the paradox of restricted funding. It sustains programs but starves the core. Across the nonprofit sector, regardless of organization size, the same trap appears: organizations succeed in delivering services but struggle to invest, adapt, or endure.
Unrestricted funding offers the counterweight. It is not a cure-all, but it gives nonprofits the flexibility to build the teams, strengthen systems, and the to move beyond subsistence toward lasting impact.
The question, then, is where this kind of support comes from, and, which organizations can realistically expect to secure it? Here is what data and our own experience suggest.
Who Graduates to Unrestricted Support?
Unrestricted support can come from multiple sources: individual donations, high-bet-worth traditional grantmakers. Encouragingly, a growing number are increasing the supply of flexible support, including The Ford Foundation through its BUILD program, MacKenzie Scott, and a widening circle of trust-based philanthropists.
While they are great dollars if you can get ‘em, not every nonprofit secures multi-year general operating support (GOS). The ones that do share some commonalities:
Scale and maturity: Organizations that win unrestricted support are often in the $1M–$10M annual budget range. For example, CEP research showed MacKenzie Scottt’s typical recipient has a median pre-grant budget of $8 million while her open calls targeted the $1-5 million budget range. This 'middle tier' has demonstrated both impact and the capacity to absorb and deploy significant unrestricted capital effectively.
Credibility and governance. Audited financials, strong boards and sound stewardship, are all characteristics unrestricted funders look for.
Leadership. Funders invest in leaders they trust. As in venture capital, they bet on the jockey, not the horse.
Evidence of impact. Unrestricted dollars depend on trust. Funders want measurable outcomes and matching feedback and learning systems.
When the transition happens
The path to unrestricted funding is measured in years, not months. Most organizations spend several years cultivating funder relationships, demonstrating impact, and strengthening internal systems before they receive significant GOS.
The timeline can be long. The key: building trust. The following roadmap distills lessons learned from organizations that have succeeded.
How to Make the Leap
1. Build an enterprise case, not a program case: Tell the whole story: leadership, systems, partnerships, and how these drive mission outcomes. A tight two-page enterprise case can be more persuasive than a lengthy program narrative.
Getting granular: If your organization runs multiple disparate initiatives, you may need to fundamentally re-think and re-formulate your strategy to make it coherent for unrestricted funders. This might mean:
Identifying the common thread that connects all your programs
Consolidating similar initiatives under unified strategic themes
Making hard choices to sunset programs that don't align with your core mission
Developing a clear theory of change that explains how all your work contributes to a singular organizational impact
Can you explain your organization's purpose in one compelling sentence? If not, potential unrestricted funders won't understand what they're investing in.
2. Articulate a clear vision for scale: Communicate how unrestricted funding will move your impact to the next level.
Getting granular:
Show the multiplier effect: How would core investments enable you to attract additional funding and expand impact?
Present specific scenarios: "With $500K in unrestricted funding, we could hire a development director and increase our fundraising capacity by 200% within two years"
Quantify the opportunity cost of your current funding model (e.g., "Our CEO spends 40% of her time on compliance reporting instead of strategic partnerships")
3. Be transparent about full costs: Present a full-cost budget and explain how funds will support operations and reserves. This honesty is crucial in breaking the “starvation cycle” of chronic underinvestment.
Getting granular:
Show overhead allocation across programs
Include a reserves plan with specific targets
Highlight hidden costs of restricted funding (grant management, compliance, reporting, and the opportunity costs of fragmented funding)
4. Target funders who lean flexible: Focus on funders with explicit GOS or multi-year programs, whether high profile funders or others focused on your sector. Research funder practice to match your ask.
Getting granular:
Track donors unrestricted giving patterns and timelines
Ask current funders for referrals
Attend funder collaboratives and convenings where unrestricted funders network
Study the language these funders use in their grant descriptions and mirror it in your proposals
5. Demonstrate readiness signals: Independent audits, board-approved strategic plans, evaluation frameworks, and clear financial policies reduce risk for funders. These are credibility investments, not red tape.
Getting granular:
Develop a "funder readiness checklist" covering governance, financial management, and evaluation systems
Train and support board members so they can speak confidently about organizational capacity
Consider whether your board composition reflects donor demands, for example in terms of representation or diversity
Create systems that make it easy to produce regular financial reports, impact dashboards, and other accountability measures funders expect
Document your organizational learning: How do you adapt programs based on evaluation findings?
6. Build deep relationships and trust with potential funders: Lean into trust-based practices and create opportunities for funders to get closer to your organization and its impact.
Getting granular:
Invite potential funders on site visits or field trips to see your work firsthand—nothing builds trust like witnessing impact in person
Leverage your board members' networks by asking them to make introductions to funders in their circles, positioning board members as credibility validators
Negotiate lighter reporting requirements with current funders and co-design indicators that matter to both parties—when funders see you stewarding flexibility well, they're more likely to renew or expand support
Create informal touchpoints: coffee meetings, community events, or briefings that allow funders to get to know your leadership team beyond formal proposals
Be vulnerable about challenges and how you're addressing them: authenticity builds trust more than perfection
What We Can Learn
Recent research reinforces a clear pattern: when nonprofits have flexible support, they invest in the fundamentals that determine long-term resilience: staff, systems, and financial cushions. The Center for Effective Philanthropy shows unrestricted gifts translate into enterprise readiness, while trust-based philanthropy emphasizes lighter reporting, longer commitments, and shared design as pathways to deeper impact.
Major funders echo these findings. The Ford Foundation’s BUILD initiative and MacArthur’s experiments have demonstrated that pairing flexibility with organizational strengthening delivers outsized results. Meanwhile, MacKenzie Scott’s Yield Giving shows the transformative potential and the challenges of scale: immense benefit to grantees, but also pressing questions about equity, sustainability, and how to coordinate at the field level.
The lesson is consistent: unrestricted funding is a catalyst. Paired with trust, accountability, and organizational investment, it accelerates impact and strengthens the social sector as a whole.
Where to from here
The quest for unrestricted funding invites nonprofits to prepare, strategically and structurally, to receive it. At the same time, what’s clear is that access to this kind of funding remains uneven.
More established organizations often benefit first, while smaller and community-based groups continue to fight for visibility. This imbalance risks reinforcing the very inequities philanthropy seeks to address.
Even when flexible dollars arrive, power dynamics persist. Donors may ease reporting requirements, yet expectations for results remain. Nonprofits must find their own balance between responsiveness and independence and invest in ways that outlast any single grant.
The future of unrestricted funding will hinge not only on funders’ generosity, but also on nonprofits’ readiness and the philanthropic sector’s ability to coordinate.
The organizations willing to confront questions of equity, power, and sustainability head-on can set the standard and help turn this moment from a passing trend into more resilient sector
For more on this topic
Center for Effective Philanthropy (CEP). Giving Big: The Impact of Large, Unrestricted Gifts on Nonprofits. https://cep.org/report-backpacks/giving-big-year-one/
Center for Effective Philanthropy (CEP). The Impact of Large, Unrestricted Grants on Nonprofits: A Five-Year View. https://cep.org/blog/the-impact-of-large-unrestricted-grants-on-nonprofits-a-five-year-view/ (June 2024)
Stanford Social Innovation Review (SSIR). What Trust-Based Philanthropy Is and What It Is Not. https://ssir.org/articles/entry/what_trust_based_philanthropy_is_and_what_it_is_not
Stanford Social Innovation Review (SSIR). The Hidden Barriers to Unrestricted Funding. https://ssir.org/articles/entry/unrestricted_funding_barriers (2024)
Ford Foundation. BUILD Evaluation Final Report. https://www.fordfoundation.org/work/learning/program-evaluations/build-evaluation-final-report/
Ford Foundation. BUILD: Building Institutions and Networks. https://www.fordfoundation.org/work/our-grants/building-institutions-and-networks/
Wiepking, P. (2024). Unrestricted funding and nonprofit capacities: Developing a conceptual model. Nonprofit Management and Leadership, Wiley. https://onlinelibrary.wiley.com/doi/full/10.1002/nml.21592
Blue Meridian Partners. Announcing Blue Meridian Partners. https://www.bluemeridian.org/updates/announcing-blue-meridian-partners/ (2021)
Blue Meridian Partners. Blue Meridian's First Grantees. https://www.bluemeridian.org/updates/blue-meridians-first-grantees/ (2021)
Kim, M., Charbonneau, É., & Sowa, J. (2025). The Nonprofit Starvation Cycle: The Extent of Overhead Ratios' Manipulation, Distrust, and Ramifications. Nonprofit and Voluntary Sector Quarterly. https://journals.sagepub.com/doi/abs/10.1177/08997640241233724
National Council of Nonprofits. (Mis)Understanding Overhead. https://www.councilofnonprofits.org/running-nonprofit/administration-and-financial-management/misunderstanding-overhead
Nonprofit Leadership Alliance. Understanding Nonprofit Overhead Costs: Myths vs. Reality. https://nla1.org/nonprofit-overhead-costs/ (August 2024)