Trends & Trendsetters

Do You Need a Grant — Or Something Else First?

September 15, 2026

greater-chicago-food-depository The Greater Chicago Food Depository began in 1979 with six volunteers and a dream: a produce wholesaler, a priest, an insurance agent, a social worker, and two others who met repeatedly to figure out a more systemic way to feed hungry people in Chicago. They had no staff, no warehouse, no budget: just borrowed space at a produce stall and a shared conviction. One founder wrote the proposal for their first grant, $47,500 (approx. ¥7,300,000) from the City of Chicago, awarded that March. "We didn't have a lot of resources, but we had many willing hands," founder Ann Connor recalled. That grant, and the two employees it funded, became the foundation for what is now one of the country's largest food banks.

otsuka-club Otsuka Club, in Japan, started the same way, not as an organization, but as parents and teachers trying to help the students at a school for deaf children catch up academically. There was no money to speak of, no formal incorporation, no accounting, just people showing up. That changed in 2004, when a Ministry of Education initiative offered three years of after-school funding but only to incorporated groups. Once incorporated, the resulting grants let the group grow from 48 students to 170. Having more funds and the possibility of growth was welcome, but formal incorporation changed how the group operated, introducing a level of structure and administration it hadn't needed before.

Both stories start the same way — an informal group with a real problem: no money. If you are running a small nonprofit in the US or Japan, this probably sounds familiar. Money is an obvious good, but spending weeks on an application and then spending that money strictly within a funder's guidelines isn't always so simple. So it's worth asking a harder question: does your organization actually need a grant right now, and are you ready to use one to best effect?

Grants as Tools, Not Lifelines

pexels-photo-7841798 Most grant programs are built to fund specific, time-bound projects, not to plug general budget holes — for better or worse (in an ideal world, general operating support would be far more common; in practice, it remains the exception). The test before applying is simple: what concrete thing would this funding let you do that you genuinely can't do now? A grant that doesn't answer that question clearly is usually the wrong grant to chase, however large it is.

Eligibility runs through legal status on both sides of the Pacific, just built differently. In Japan, an incorporated non-profit (NPO hōjin) and an informal voluntary organization (nini dantai) are treated very differently; USJF-supported analysis of Japan's nonprofit legal framework notes that most public subsidies presuppose incorporation and basic governance, and the gap became stark when Japan's COVID-era Subsidy Program for Sustaining Businesses required a 50%-or-greater revenue drop to qualify, a threshold that smaller, leanly run groups, often without large revenue swings to point to, could struggle to meet.

In the US, almost all foundation and government grants require federal 501(c)(3) determination from the IRS, not merely state incorporation; small groups can use the streamlined Form 1023-EZ, but full determination still takes weeks to months, and roughly 40 states additionally require registration before an organization can legally solicit donations. One common US workaround is fiscal sponsorship; an existing 501(c)(3) receives and manages grant funds on a new group's behalf, letting a project apply for grants immediately without waiting on its own IRS paperwork. Either country's path means a real administrative threshold stands between "we have an idea" and "we can legally receive this money." Becoming eligible is itself a decision with costs, not just a formality to clear on the way to the funding.

What It Takes to Manage a Grant

pexels-photo-6779567 Winning is not the end of the work. Grants typically come with defined reporting and use-of-funds requirements, and meeting them can take more time and staff capacity than first-time applicants expect. The case for unrestricted funding is well-documented; the practice of offering it is not. In the U.S., the National Council of Nonprofits reports that three out of four nonprofits are unable to recover more than 10% of their real overhead costs from government grants, and nearly a quarter recover nothing at all, even though actual overhead for organizations of any kind typically runs 25 to 35%. The same nonprofits report that application and reporting requirements are themselves complex and time-consuming, meaning a chunk of any grant effectively gets spent on compliance rather than the mission it was meant to fund. Volunteers and small staff absorb this cost directly, in evenings and weekends spent decoding budget categories and reworking line items rather than doing the work itself.

Asking the Better Question

Beyond the compliance burden, there is a subtler risk: letting the funding shape the mission rather than the other way around. Research by nonprofit scholar Joannie Tremblay-Boire finds that heavy reliance on a single funder can gradually influence which programs get prioritized. The same research notes an uncomfortable tradeoff: diversifying funding sources reduces that risk, but juggling more funders also means more applications and more reporting, trading programmatic drift for what researchers call "administrative drift." There is no funding structure that avoids the tension entirely, only more and less honest ways of managing it.

So instead of asking only "can we win this grant?", small nonprofits might start with: “will this grant strengthen our organization, or strain it?” For some groups, the honest answer is "not yet." For others, "yes, but only if we keep it modest and shore up the basics first." That pause, before reaching for the application, is something that nonprofits in Japan and the US should take.

Key Takeaways for Nonprofits

Use grants for specific steps, not survival

Name the concrete activity the funding enables before you apply.

Check eligibility honestly

Legal status and basic governance often decide access before the quality of an idea does, whether that's Japan's incorporation requirement or the US's 501(c)(3) determination and state registration rules.

Budget for compliance, not just the project

Reporting and indirect costs eat into grants more than most first-time applicants expect.

Diversify where you can

Relying on a single funder for multiple years is worth watching, since program priorities can gradually shift alongside it.

Know your legal path before you apply

Whether it's incorporation, fiscal sponsorship, or state charitable registration, formalizing status is often the real first step, and it takes time to plan for.

In the next installment, we turn to strategies for successful grant applications, following this piece, which has focused on what every nonprofit should weigh before applying for a grant at all. For the specific eligibility criteria and terms of USJF's grants, visit our Grants page or Proposal Guidelines page.

← Back to Trends & Trendsetters