How does a community impact project actually get funded?

Most organizations think a capital campaign is the thing you run to build the building. In practice there are three campaigns, they happen in sequence, and the two that come before construction are the ones that kill projects.

Organizations fail at this not because they can't fundraise. They fail because they try to run campaign three first, and discover that nobody will fund construction for a project that has never been underwritten.

Key takeaways

• Campaign 1 funds the feasibility study. It is the smallest ask and the hardest to place, because nothing exists yet to show a funder.
• Campaign 2 funds predevelopment — design, legal, environmental, entitlements. On one project we manage, raising $1.2 million for this stage took fourteen separate sources.
• Campaign 3 funds construction, and by the time you reach it the money gets easier, not harder, because the work of the first two campaigns is exactly what construction funders require.
• Soft costs run roughly 30% of total development cost on comparable projects — and most of them come due before construction financing closes.
• Sequence is the whole game. Every source in campaign 3 asks for a document produced in campaigns 1 and 2.

Campaign 1: paying to find out whether the project is real

The first campaign funds a feasibility study. Depending on scope, that's anywhere from a $5,000 scoping exercise to a six-figure comprehensive study with market research, financial modeling, concept design, and a business plan.

It is a small number relative to the project. It is also, reliably, the hardest money in the entire sequence to raise, for a reason worth stating plainly: at this stage the organization has nothing to show. No drawings, no pro forma, no proof of demand. It is asking a funder to pay for the possibility of a project.

Funders know this and many decline on principle. One community foundation told us directly that it does not support feasibility studies through discretionary funds — that this is considered the responsibility of the lead organization, before a capital campaign begins. That is a common position, and organizations should expect to hear it.

So where does campaign 1 money actually come from?

• The organization's own reserves. Unglamorous, and often the fastest path.
• The congregation, membership, or board. Board members with professional backgrounds in architecture, finance, or construction can contribute expertise that offsets real study costs.
• Small local and family foundations, which often move faster and with less process than large ones.
• Municipal and county economic development funds, where the project advances a published redevelopment plan.
• Technical assistance programs. Regional intermediaries, CDFIs, and Federal Reserve community development groups sometimes fund exactly this stage, and they are chronically underused.
• Deferred or contingent professional fees. Some advisory firms — ours among them — will defer a portion of fees or take an equity position to reduce what an organization has to raise up front.

The argument that unlocks this money is not the vision. It is the risk-reduction case: a study costs a fraction of one percent of total project cost and tells you whether to spend the rest. Funders who won't pay for a dream will sometimes pay to prevent a much larger waste.

Campaign 2: paying to make the project buildable

This is the stage that separates projects that get built from projects that stay in a board binder.

Predevelopment covers survey, environmental assessment, geotechnical work, architecture and engineering through a permit set, legal and entity formation, zoning and entitlements, and the development management to run all of it. It is mostly soft cost, and soft costs run roughly 30% of total development cost on comparable projects, with some states running as high as 34% (GAO-18-637, Fig. 4, p. 14).

It is also spent entirely at risk. Nothing is built. The organization may still discover the project doesn't work.

Here is what it actually takes. On one project we manage, the predevelopment stack came to roughly $1.2 million raised from fourteen separate sources:

Note the shape of it. The largest single grant covered under half the need. The smallest was $5,000. There is no version of this where one funder writes one check. Fourteen relationships, fourteen applications, fourteen reporting requirements — and a separate in-kind contribution from a state environmental agency that covered a $147,000 environmental assessment the organization could not have paid for in cash.

That in-kind piece is worth dwelling on. A state agency absorbing an environmental cost is not a grant anyone applies for on a portal. It came from a relationship and from asking.

Predevelopment lending is the other half of campaign 2, and it is not well understood. LISC, for example, publishes predevelopment loans from $50,000 to $2,000,000, starting at 7.85%, interest-only, with terms up to three years (LISC Loan Products). That is real, available capital — and note that it comes from a CDFI, not from a state housing finance agency. Most states do not run a predevelopment loan program at all. The CDFI world does.

Recent research on organizations developing institutional property names lack of predevelopment capital as one of four primary barriers, alongside limited organizational capacity, complex ownership systems, and the absence of proven models (RootedGood, Fieldworks, September 2025). The National Housing Conference puts it more bluntly: obtaining financing for predevelopment is difficult in good economic times, especially for small nonprofits, and harder in bad ones (NHC Policy Guide).

Campaign 3: paying to build it

Here is the counterintuitive part: this campaign is easier.

Not small — the numbers are an order of magnitude larger. But easier, because by this point the organization has a design, a cost estimate, a pro forma, site control, entitlements, and often letters of intent from tenants. Every one of those is something a construction funder asks for. The organization spent two campaigns manufacturing exactly the evidence that campaign three requires.

The construction stack usually combines:

Large competitive grants. State and federal programs in the seven and eight figures — commercial district revitalization, economic development, disaster recovery. These have long timelines and real failure rates, and they should never be the only plan.

Tax credit equity. New Markets Tax Credits are the primary tool for community facilities. The credit equals 39% of the qualified equity investment, claimed over seven years (CDFI Fund). In practice the net benefit to a project, after transaction costs, is considerably lower than the headline — we published a full breakdown of what those costs look like on a live $30 million transaction. For housing, Low-Income Housing Tax Credits do similar work through a different mechanism.

Philanthropic capital at scale. The foundations that declined campaign 1 will often engage at this stage, because the risk profile is completely different. A funder who won't pay $50,000 for a study will consider $2 million toward a building that has permits.

Program-related investments. Below-market loans from foundations, which count toward a private foundation's required annual distribution (IRS). Patient money that fills gaps conventional lenders won't.

CDFI debt. Longer terms and more flexible underwriting than a bank, sized against the project rather than the organization's balance sheet.

Conventional debt, kept small. For mission-driven projects that won't generate market returns, the goal is to minimize this rather than optimize it.

What does the sequence look like end to end?

Written out as a roadmap, a project of this kind moves through eight stages:

1. Define the vision. Goals, precedents, scope, stakeholders, and the project team — including a development manager and an owner's representative, hired early rather than after the architect.
2. Run campaign 1. Scope and price the feasibility study, identify sources, establish the project entity, raise the money.
3. Assess feasibility and write the business plan. Determine whether the project is legally, technically, financially, and community-viable. If it isn't, return to stage 1. Phase the project into fundable pieces.
4. Build capacity. If the returns fall below what a conventional investor requires — which is usually the case — the project needs grants and impact capital, and that capital requires the organization to demonstrate a track record and a real presence in the community. Formalize partnerships.
5. Run campaign 2. Scope and price predevelopment, identify sources, raise it.
6. Execute predevelopment. Full due diligence, architecture and engineering to a permit set, entitlements, then financial closing.
7. Construct. Two to three years, depending on phasing.
8. Operate.

Most organizations arrive somewhere around stage 3 with a rendering already in hand and no business plan. The rendering came first because it was the exciting part, and because an architect was the first professional anyone called.

Why does the business plan matter more than the drawing?

Because of who reads it.

A project of real scale needs millions of dollars from foundations, investors, and lenders. A feasibility study and a business plan are what demonstrate that the organization has done the work — that the money, while still at risk, is in competent hands. Without them, raising enough capital is close to impossible. Every institutional funder in campaign 3 is underwriting the organization as much as the project, and the business plan is the primary evidence of both.

This is also why stage 4 exists as a distinct step rather than a footnote. When a community project cannot clear a market return — and most cannot — it must be funded with grants and impact investment. That capital is awarded to organizations with demonstrated capacity, not to good ideas. Building that track record is itself a stage of the project.

How do different projects actually pay for this?

Three patterns we see regularly:

Municipal grant stacking. A project advancing a city's published redevelopment priorities, assembled largely from city and county economic development grants. Works when the public sector already wants the outcome and the project is small enough that a handful of public sources can close the gap.

Grant-and-tax-credit stacking. A larger community facility combining competitive state grants, foundation capital, NMTC equity, and modest CDFI debt. This is the standard structure for a $20–50 million community facility, and the one that requires the most professional infrastructure to execute.

Ground lease and partner development. The organization contributes land under a long-term ground lease and a partner with the balance sheet develops the project. Less control, less risk, ongoing income. For a nonprofit with land and no development capacity, often the realistic answer.

None of the three works without campaigns 1 and 2.

FAQ

How much should we budget for the feasibility study? It depends entirely on scope — a narrow site-scoping exercise and a full comprehensive study with market research, financial modeling, and concept design differ by an order of magnitude. Price the scope you need for the decision you're actually making. Staged studies with a decision point after each stage are usually better value than one large one.

Can we skip the feasibility study if we already know what we want to build? You can, and some projects survive it. What you're skipping is not the design — it's the verification that the site allows it, the market needs it, and the numbers work. Every funder in campaign 3 will ask for that verification. You are deferring the work, not avoiding it.

How long does the whole sequence take? Campaigns 1 and 2 commonly run two to four years combined for a community facility of meaningful size. Construction adds two to three. Organizations consistently underestimate the front half.

What if we lose a major grant partway through? It happens, and it should be planned for. On one project we manage, the loss of an anticipated federal grant required a full value-engineering and restructuring exercise — a real, budgeted line item in the predevelopment costs. Build the contingency and keep more than one path open in every campaign.

Sources

• GAO-18-637, Low-Income Housing Tax Credit (Sept. 2018) — soft costs ≈30% of total development cost; range 24–34% across allocating agencies.
• LISC Loan Products — predevelopment loans $50,000–$2,000,000, from 7.85%, interest-only, up to 3 years.
• RootedGood, Fieldworks Initial Research Report (September 2025) — predevelopment capital as a primary barrier.
• National Housing Conference, Pre-Development Funds — difficulty of predevelopment financing for small nonprofits.
• CDFI Fund — New Markets Tax Credit Program — 39% credit over seven years.
• IRS — Program-Related Investments — PRIs count toward the 5% minimum distribution requirement.

Project figures are drawn from nSCALE's own predevelopment and development sources-and-uses schedules, dated September 2026.