Direct and indirect funding

Direct funding

Funding can be direct, that is cash payment. Direct funding is often fairly difficult unless you have well-established funding lines, such as a track record with the government. In an enterprise RTO, you need to prove to management that your training will produce cost-benefit results.

Applications for government grants can take substantial effort, there’s no guarantee you’ll get them, and they might be relatively small amounts anyway. Besides, there might be onerous compliance and reporting costs. (See the separate e-book on how to get grants.)

Indirect funding

Funding can also be indirect. Somebody else pays for it, and you might not even be aware that you have been funded. Indirect funding is often easier to get than direct funding, especially for community organizations, as they often have volunteer help and below-cost facilities.

Sounds good. Here are some examples:

• Labour: volunteers, advisors, seconded personnel, on-job supervisors.
• Advice: Some government departments are generous with free advice, seminars, and literature.
• Student support: Austudy is currently the simplest source of indirect funding.
• Building costs: If you borrow a building, the insurance cover, cleaning, water, electricity, maintenance and depreciation on it is free to you. These may also include equipment or facilities,  power, phone, internet access, etc.
• Insurance cover If you can place an intern in an insured organization, the insurance cover is free to you.
• Funding for in-house training: Businesses give substantial indirect funding through overheads, on-job supervisors, and incentives for improved employee performance.
• Discounts: These include tax breaks (e.g. for non-profit organizations), lower cost purchases, volunteer insurance rather than worker’s compensation insurance, special rates for non-profit organizations.
• Internet information if you can effectively use it as a learning resource.

Indirect funding has several traps:

• It can only get you so far. For example, you can't run a large organization completely with volunteers; you need paid full-timers when the organization reaches a certain size. And what if volunteers do low-quality work?
• Indirect funding doesn't show up in your accounting. You you might not even know how much of it you are getting so you don't know how much it costs to run your organization.
• The business model is that you get your income from your donors, not from conducting business. This means you have two very different kinds of stakeholders to keep happy. Consequently:
• You need to monitor any kinds of hidden obligations that you incurr. For example, how will you respond if a donor wants to call in a favor?
• You wil probably attract more clients than you have funding to support, becuase clients don't pay full market value for your services. It is usually easier to attract prospective clients than donors.