Not All New Business Grants Are Good: Why Saying 'No' Can Be Strategic

Philip
Jul 7
3 min read

In the nonprofit world, where funding is competitive and opportunities can be rare, the instinct is to say “yes” to any grant that comes your way. After all, grants keep programs running, staff paid, and impact flowing.

But here’s the truth: Not all grants are good grants.

Some funding may seem attractive on the surface but carries costs that are harder to see - like strategic drift, resource overload, or mission compromise.

Being able to say “no” is not a sign of arrogance or waste - it’s a mark of maturity and strategic clarity.

At The Grants House, Dr. Phil says,

“A grant should serve your mission, not redefine it.”

And it's true, because when you build the discipline to walk away from misaligned opportunities, you create space for high-fit funders who truly believe in your vision.

🔍 So When Do We Walk Away?

Knowing when a grant is the wrong fit is often harder than identifying a good one. Here are four common scenarios where the smartest choice may be to decline:

🎯 1. Mission Misalignment

If the grant requires you to stretch your programming to match a donor’s agenda, rather than strengthening your core, it may do more harm than good.

Example: You’re an education nonprofit focused on early literacy. A funder offers you money for secondary STEM projects. It’s tempting, but it draws your team into unfamiliar territory and creates distraction from your strategic priorities and life-stage target.

⏱️ 2. Unrealistic Expectations

Sometimes the grant’s scope is technically in line, but the implementation timeline, M&E burden, or administrative requirements are excessive. Pursuing it could overload your staff, dilute program quality, or risk noncompliance.

A central question should be:

“We could do it, but at what cost to our team?”

📏 3. Restricted Funding Constraints

Restricted grants often come with narrow budgets that don’t allow for adaptive implementation. If the funding is rigid, unable to support core operations or unexpected realities on the ground, it can stifle innovation and cause financial strain.

Many small grants demand as much paperwork as large ones, without the flexible support you need to deliver meaningfully.

⚖️ 4. Unhealthy Power Dynamics

Some funders still operate in ways that prioritize visibility, control, or self-promotion over authentic partnership. If the funder relationship feels performative or extractive, requiring your community to serve their narrative, pause and reconsider.

Ask yourself:

“Who benefits from this grant: the community or the donor?”

🤝 How to Decline with Integrity

Declining a grant doesn’t mean burning bridges. It’s possible and professional to say no with gratitude, context, and class.

Here’s a four-step structure:

1. Express Gratitude

“We appreciate the opportunity to apply and value your interest in our work.”

2. Provide Honest, Brief Context

“After careful internal review, we’ve decided to focus on [X strategic priority] this cycle, and this opportunity, while important, doesn’t align closely enough.”

3. Keep the Door Open

“We look forward to exploring future collaborations that align more fully with our mission.”

4. Respect the Timeline

Let the funder know well in advance of the application deadline or decision date, so they can redirect support or adjust expectations.

This kind of clarity builds trust. Funders value self-awareness and won’t forget your professionalism.

🌱 What You Gain by Saying No

Saying no can feel risky, especially when you’re chasing sustainability. But the upside is real and long-term:

Clarity of Purpose: Your programs stay aligned with what you do best.
Team Cohesion: Your staff avoids burnout from overreach or unnecessary pivots.
Donor Respect: Funders recognize you as a strategic partner, not just a service provider.
Room for the Right Fit: By closing one door, you make space for the right one to open.

“Your best yes may come from the time you said no.”

🧠 Tool Take-Away: Develop a Grant Fit Framework. Score each opportunity across categories:

Mission alignment
Capacity to deliver
Flexibility of funds
Strength of partnership

If the average score is below a certain threshold, pass gracefully.

To support your decision-making, we’ve created a free tool you can use to assess whether a grant fits your strategy, staffing, and sustainability plan.

Use it at the prospecting, decision, and review stages to build alignment and discipline across your team.