Your nonprofit needs secure funding to power your programs, and it might be time to consider your financial future beyond the traditional annual giving cycle. An endowment is an excellent option for nonprofits of all sizes to establish long-term financial stability.

An endowment is a pool of assets established by charitable contributions and invested by nonprofits to provide long-term, sustainable financial support for its mission or specific programs, often as defined by the donor(s).

For example, a donor might establish a scholarship endowment at a university. Rather than spending the principal, the university would distribute a portion of the endowment’s accumulated investment earnings each year to pay for students’ education.

However, while endowments can offer perpetual funding, they also come with certain limitations and requirements, meaning nonprofits should carefully consider whether their organization is prepared to properly steward and operate one. This article will review the top four considerations your organization should assess before deciding whether to start an endowment.