What is Underwriting? How to Keep 100% of Consignment Profit | LuxGive

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Intro to Underwriting

It's no secret that procuring the right auction items for your raffle, live, or silent auction is critical to your fundraising event's success. From auction vacation packages to tickets, VIP experiences, and sports memorabilia, these items generate buzz around your event and drive major funds to your mission.

But securing high-quality, curated items can be a challenge.

While auction items donated to your organization are free, they often lack audience appeal. And while consignment is risk-free and offers a broad selection of highly-coveted prizes, part of the proceeds you raise will go to covering their cost.

So where does underwriting come in? 

This innovative fundraising strategy gives you the best of both worlds: a highly-desirable consignment prize that allows you to keep 100% of the proceeds.

Ready to learn more? 

What is Underwriting?

Contrary to popular belief, sponsorship and underwriting are two different things.

Sponsorship lets donors make a direct payment to your nonprofit with the added benefit of public recognition, branding opportunities, promos, exclusive access, or other forms of visibility. 

Underwriting, on the other hand, allows businesses or individuals to cover an item's consignment cost. That means the underwriter pays the vendor directly allowing your nonprofit to place the item at auction for free.

the underwriting process

How Does Underwriting Work?

Much like procurement, the underwriting process starts with seeking out local businesses, organizations, and individuals interested in supporting your charity event.

Once secured, the underwriter will cover all or a portion of your item's consignment cost in exchange for visibility at your event. This could be anything from auctioneer shout-outs to recognition in your program. Most importantly, the underwriter will write a check to the vendor, not to your cause. 

With the cost of your auction item covered, your nonprofit keeps every cent of the winning bid. In return, your underwriter gets valuable exposure at your event while associating their name or brand with your philanthropic mission.

How to Underwrite Auction Items

Once you've procured your consignment items, you're ready to underwrite them! Here are four simple steps to help you complete the underwriting process.

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1. Draft Your Proposal Letter

Your letter should include a brief blurb on what underwriting is and the impact it has on your fundraising. Be sure to highlight how donors will benefit, such as public recognition and a tax-deductible donation.

Request your free underwriting letter and agreement template from LuxGive.

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2. Secure Your Underwriter

Reach out to local businesses, organizations, and donors who may be interested in supporting your fundraising event. In addition to direct outreach, nonprofits can also leverage networking events, industry connections, and partnerships to identify potential underwriters. 

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3. Confirm the Agreement

Provide your underwriter with a written agreement or commitment form. This form should include:

  • The name of your NPO and event date
  • The underwriter's contact info
  • The item and total cost
  • Underwriter's signature and date

Once signed, have your vendor send the invoice and receipt of payment directly to the underwriter. Be sure to send a thank you letter to your underwriter as well! 

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4. Auction Off Your Item

With the cost of consignment covered, you can now auction off your item for 100% profit! Be sure to acknowledge your underwriter generously at your event.

Example:

Your NPO secures a luxury villa in the Caribbean for $4000. LuxGive sends a $4000 invoice to your underwriter, and the underwriter pays LuxGive directly. Your NPO sends a thank you letter to the underwriter for their $4000 payment in support of your charity event.

Benefits of Underwriting

1. Keep 100% of Proceeds

When a business or individual underwrites an item, the cost of consignment is covered. That means your nonprofit keeps 100% of the winning bid. By eliminating the expense of auction items, every cent you raise goes straight to your nonprofit's vital programs and initiatives.

💡Fundraising Tip: 

You can secure multiple underwriters for one experience, ensuring you always cover 100% of the consignment item cost.

2. Avoid 'No Consignment' Policies

Underwriting is a powerful way to get around "no consignment policies" or expense ratio restrictions (the amount of funds spent to raise dollars). By having underwriters pay vendors directly, you can auction off showstopping prizes without compromising your nonprofit rating.

3. Raise More Money

Consignment lets you offer a wide range of exclusive and exciting auction prizes such as luxury escapes to Tuscany or a dream Disney getaway. Showcasing these appealing underwritten items not only generates buzz around your event, but also increases donor competition and drives significantly higher bids. 

By waiving the cost of consignment, you also raise more money directly for your mission.

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luxgive travel experiences luxury villa in tuscany in rolling hills
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4. Forge Community Partnerships

Underwriting auction items provides an opportunity for you to forge partnerships with corporations, small businesses, and individuals in your community. By writing a simple check, underwriters get plenty of recognition while you benefit from financial support. 

Building these partnerships also lets you tap into the underwriter's network, leveraging their connections to attract new supporters and sponsors.

5. Increase Fundraising Impact

Seeking item donations from your network is often a missed opportunity for both parties. Procurement takes precious time for low returns and donors' support could be put to better use (let's face it – most of your supporters don't have luxury vacation homes or front-row seats to a Lakers game). 

Underwriting lets those without auction-friendly products or services support your cause. A dentist underwriting an auction vacation package will have a far greater fundraising impact than auctioning off a root canal (yes, we've seen it all!)

6. Improve Donor Engagement

Using underwritten items to increase audience attendance isn't just about driving more bids. It's a crucial opportunity to expand your donor base and engage more supporters. When your audience is engaged, they're more likely to forge positive associations with your cause and continue supporting its mission in the future.

Getting donors to underwrite items themselves can also be a powerful way to deepen their connection to your organization and encourages a sense of ownership of the event. 

fundraiser event donor engagement

Take Action

Your event's success starts with great consignment. As the top provider of luxury auction travel packages, LuxGive offers an exclusive portfolio of luxury home and villa experiences that have raised over $15 million for causes like yours.

Speak with a fundraising consultant today to underwrite one of these incredible travel experiences or hit the chat icon in the bottom right to learn more.

At LuxGive, we believe in the transformative power of travel. Our mission is to help nonprofits raise more funds at auction through once-in-a-lifetime home and villa experiences.

Our travel experiences feature Premium Guest Services for trip planning and access to an exceptional portfolio of over 1,500 stunning private properties across the world. 

Whether it’s a luxury Caribbean villa, an enchanting Tuscan apartment, or an alpine lodge steps from the powder, we have something for all your clients' needs.

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