Sponsorships from the business community can be an effective way to build a nonprofit’s fundraising network and obtain the financing necessary to run large events. In turn, sponsors enjoy unique advertising opportunities and an increased perception of being community-oriented. The backbone of an event sponsorship is the sponsorship agreement.
What goes into a sponsorship agreement?
Sponsorship agreements are often negotiated as significant contracts by both sides. Both the business sponsor and the nonprofit want to ensure that the arrangement will be fair and beneficial to their cause. A typical agreement will include terms such as:
- How much money the sponsor will pay, and when its payments will be due.
- Confidentiality obligations on both sides.
- Specific intellectual property licenses to allow each side to use the other party’s name, logo, and other brand matter in its own promotional materials.
- Any contingencies that could free the sponsor from its obligation to pay.
Although sponsorship agreements do not need to be long, they can open pitfalls for unwary nonprofits. Ideally, a nonprofit has a preferred form of sponsorship agreement ready to go before it reaches the contract stage. But many corporate sponsors will have a preferred form of sponsorship agreement of their own. A nonprofit should be reluctant to accept terms that it does not want to see repeated in future contracts, especially if it intends to continue working with a sponsor.
Keep in mind the value proposition to the sponsor.
When negotiating a sponsorship agreement, a nonprofit can benefit from having a clear idea of the value it is offering in exchange for the sponsorship. Businesses that sponsor nonprofit events do so with the expectation that their contribution to the event will translate into significant value for the business. The sponsor realizes value through regular, high profile use of its name and logo, and through its association with a cause that, in its analysis, is one that its customers wish to support as well.
Business sponsors expect their beneficiaries to take steps to include them in speeches, promotional materials, and other activities surrounding the event. This extends to the nonprofit’s social media accounts. Many sponsors will expect a degree of control over how their name and logo is used, with some insisting on complete oversight of any communication that includes their name. A nonprofit needs to take such demands seriously, including training staff to be sensitive to the sponsor’s expectations.
Talk to a nonprofit attorney about your organization’s sponsorship plans.
The Church Law Center of California serves religious and secular nonprofits throughout California. Call us today to talk about your organization’s sponsorship plans. We can help you develop a form agreement or negotiate terms to protect your organization’s mission. Reach us at (949) 689-0437 or through our contact page.