Definition of In-kind Sponsorship

by Hunkar Ozyasar; Updated September 26, 2017
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Businesses of all sizes contribute to social causes. While providing cash to charitable causes and organizations is the most common way of doing so, many other alternatives exist. Being aware of such alternatives provides businesses with a wide variety of options and allows for a broader range of cooperation between commerce and charity.

Sponsorship Basics

In general, sponsorships are financial contributions to a specific cause in exchange for public exposure. For example, a car dealership may pay $10,000 per year to the local homeless shelter to be featured as a sponsor on banners and handouts of the shelter. Sponsorships can be general or more specific. The dealership may simply pay a specific sum to become a sponsor of the homeless shelter, with no preconditions imposed on how this money is to be used. On the other hand, the dealership may pay specifically for the construction of a particular housing unit. In this case, the housing unit would likely feature a plaque inscribed with the dealership's name.

In-kind Sponsorships

Instead of paying cash to sponsor a cause or organization, a business may also donate goods or services. In the case of a car dealership, motor vehicles, such as a used van, car or truck would be the most natural contribution. A real estate developer may build and donate a shelter, while a clothing store may provide coats and jackets for use during cold winter months. The range of options for in-kind sponsorships is essentially infinite.

Benefits for the Sponsor

The primary benefit of in-kind sponsorships for the sponsor is the ease and convenience. Most businesses have large inventories of finished and semi-finished goods in storage that can be used for sponsorships, while cash is almost always tight. Especially when the goods are perishable, it could make a lot of sense to provide them to charitable causes, rather than dramatically cut prices to move inventory. A clothing store, with many coats that will soon go out of fashion, for example, may elect to sponsor a "warmest winter for the homeless" event in concert with the local charity.

Benefits for the Recipient

If well timed and executed, the recipient can receive highly valuable goods and services whose contributions to the cause at hand far exceed the monetary value. A van with cosmetic damage may have to be sold at far below the going rate, for example, but a charity will probably not mind using a van with bent fenders to transport the homeless. In some instances, in-kind sponsorships can provide customized contributions that are not obtainable elsewhere. A real estate developer may build the exact shelter that a local organization needs, with plans and the precise layout jointly drafted by the two entities.

About the Author

Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank. He has been quoted in publications including "Financial Times" and the "Wall Street Journal." His book, "When Time Management Fails," is published in 12 countries while Ozyasar’s finance articles are featured on Nikkei, Japan’s premier financial news service. He holds a Master of Business Administration from Kellogg Graduate School.

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