Capital Grants: How to Fund Buildings and Equipment

Capital projects are often the biggest fundraising challenge a community organisation takes on. A new roof, an accessible entrance, a kitchen refit or a minibus can cost more than your annual income. Capital grants exist for exactly this, but funders ask harder questions about capital than about activities, because the money is large and the asset will last for years. This guide explains what capital grants cover, what funders expect and how to build a capital funding plan.

What counts as capital

Capital means spending on things that last: buying, building or improving land and buildings, and buying equipment. Garfield Weston Foundation, for example, describes capital as building works or repairs, or equipment that is necessary for your organisation's work.

Typical capital projects include:

• refurbishing or extending a community building
• improving access, such as ramps, lifts and accessible toilets
• energy efficiency work, such as insulation, heating and solar panels
• buying land or a building
• equipment, from kitchen fittings to sports kit to vehicles

Revenue costs, such as staff, activities and running costs, are usually funded separately, although a capital funder may ask how you will pay them.

Who funds capital projects

Capital funding comes from a mix of national funders, trusts, councils and local funds. Some examples:

• Wolfson Foundation says about 85% of its funding is for capital infrastructure, meaning buildings and equipment, across education, science and medicine, heritage, humanities and the arts, and health and disability. See Wolfson Foundation grants.
• Garfield Weston Foundation funds capital projects for charities, with specific rules covered below. See our Garfield Weston guide.
• The National Lottery Community Fund can fund land and buildings through programmes such as Reaching Communities England, where it expects you to own them or have a lease that runs for at least 5 years after the work ends. See our National Lottery funding guide.
• The National Lottery Heritage Fund funds heritage projects, including buying land and buildings that are important to heritage, if they are for sale at or below market value and you have plans for their long-term care for at least 10 years after the project ends.
• Community foundations and councils often run smaller capital funds. For example, there are open funds such as Supporting capital projects within Gateshead and the Coalfields Community Capital Grant in Wales.

What funders expect from a capital bid

Ownership or a long lease

A funder wants the asset to benefit the community for many years. If you do not own the building, you will usually need a lease long enough to protect that investment. Garfield Weston says it is unlikely to make a grant unless you have at least 20 years still to run on your lease. Reaching Communities England asks for a lease of at least 5 years after the works end. Check each funder's rule early, because extending a lease can take months.

Permissions in place

Garfield Weston says any relevant planning permissions should be secured before you apply, and for religious buildings it expects faculty or similar permissions to be in place too. The Heritage Fund reminds applicants to think about permissions and licences such as listed building consent or a bat licence. A funder will rarely commit money to a project that might not be allowed to go ahead.

Realistic, current costs

Funders want to see that your costs are real. Garfield Weston does not need copies of quotes, but expects estimates or budgets that are up to date, ideally no more than three months old, and an appropriate contingency in case costs rise or the project is delayed. Contingency rules vary, though. National Lottery Awards for All England, for example, says it cannot fund contingency costs. Our grant budget template guide shows how to set costs out clearly.

Most of the money already raised

Big capital funders usually expect to be one of several. Garfield Weston, for example, expects you to have secured around 50% of the capital funding before you apply, and says its support tends to be around 10 to 20% of capital costs. For local community projects such as village halls, community centres and places of worship, it says grants are likely to be no greater than £30,000 whatever the size of the project. Our guide on how to find match funding explains how to build the rest of the funding.

Evidence of local support

Funders like to see that your community wants the project. Garfield Weston expects to see evidence of local fundraising. Letters, survey results and the number of local donors all help. See our guide to letters of support.

A plan for running costs

Garfield Weston asks how your capital project will affect your running costs. Will a bigger building cost more to heat and staff? If so, how will you pay? If it saves you money, say so. This is where many capital bids are weakest. Our guide to sustainability and exit strategies covers how to answer this.

Someone to manage it

Funders want to know who will manage the project and what experience they have. For larger works, that usually means a professional such as an architect or project manager, with a clear plan and risk register. See our risk register guide.

Building a capital funding plan

1. Cost the project properly. Get professional estimates and add a contingency where funders allow it.
2. List every possible source. National funders, trusts, your council, local businesses, community fundraising and your own reserves.
3. Sequence your applications. Approach local and smaller funders first, so you can show money already secured when you apply to the larger ones.
4. Phase the work if you can. A project in phases can start sooner and gives funders a clear piece to pay for.
5. Track pledges and conditions. Some capital grants are pledges paid only when the rest of the money is in place. Garfield Weston, for example, says its offer may be a pledge with conditions to meet before it is released.
6. Keep funders informed. Tell them when you secure other money, and if costs change.

Common reasons capital bids fall short

• Permissions not in place, so the funder cannot be sure the project can go ahead.
• Too little money secured, when the funder expects to be one of several.
• Out-of-date or vague costs, with no contingency where one is allowed.
• No plan for running costs, so the funder worries the building will become a burden.
• A lease that is too short for the funder's rules.

Each of these can be fixed before you apply, so check them against the funder's guidance first.

VAT and capital projects

VAT can add a large amount to building costs, and the rules on charities and VAT are complex. Funders treat it differently too. Awards for All England, for example, will not fund VAT you can reclaim. Take advice from an accountant or HMRC guidance early, and show clearly in your budget whether figures include VAT.

Find capital grants

GrantMatch lists open capital grants from national funders, trusts, councils and community foundations. Search for capital grants open now, browse grants for charities, or create a free profile and we will alert you to new capital funds that fit your project.