When Kate Bradley was raising money for a health clinic in Tennessee she discovered the railroad was going to sell land around some unused tracks, ideal property for the clinic.

She wrote for--and received--from the railroad president first option to buy the land. Other people, representing coal-company interests, tried to outbid her.

When she heard of the maneuvering, Bradley drove the 175 miles to Nashville for a meeting with the railroad chief and coal-company representatives and strode into the room, the only woman there.

"You must be," declared the railroad president, "Mrs. Bradley."

"I am.

"Sir," she said, "I know you are going to honor your letter giving the health clinic the right to buy your land. I know those politicians can give you a lot more money. But I just want you to know that our money comes from cupcakes. We've had a rummage sale every Saturday and held dinners and bake sales. Everyone in the community has given me a quilt, or a jar of beans, or put up some preserves to sell for the clinic. That's where my bid comes from."

The railroad president sold Bradley the land and closed the meeting.

"That," says professional fund-raiser and consultant Joan Flanagan, "is grass-roots fund-raising." Although the incident occurred about 10 years ago, it still is one of her favorite examples of grass-roots get-up-and-go.

Flanagan, 35, president of a Chicago-based firm offering workshops and consultations on fund-raising to volunteer organizations, concedes, however, that there is more to it than selling cupcakes and preserves.

"It includes bake sales but it also includes getting money from rich people, from corporations.

"People join an organization to accomplish worthwhile goals. That's why they're in. The money is a means to an end, and it's very important to keep people motivated, to have them realize they're raising money to accomplish those goals.

"What you want to do is find a way to make the most money in the least time . . . The way to do that is not to sell candy bars but ask for money. You simply go and instead of saying, 'Buy this candy bar and rot your teeth,' you say 'Support this program because it's going to accomplish X and Y and Z. Give me money.'

"Then you go out and accomplish X and Y and Z. Then you go back to the donor and say, 'Wasn't that terrific. Dollar for dollar, we're the most fabulous organization. Please give twice as much this time.' Asking for money is 100 percent profit. All you need is the courage of your convictions."

Flanagan's pointers are spelled out in an updated and revised Grass Roots Fundraising Book: How To Raise Money in Your Community (Contemporary Books, 344 pp., $8.95), for which she was commissioned by The Youth Project, a nonprofit, Washington-based public foundation.

Although The Youth Project was founded by a group of young people in 1970, it "does not focus on 'youth' as a separate constituency," says spokesman Tricia Rubacky.

The foundation gives seed grants to citizen organizations working on local problems and provides technical assistance and advice. Rubacky says Youth Project grants range "from $500 to $10,000 and average $3,000 to $4,000."

Flanagan's first book was used as the basis for what The Youth Project calls the Self-Sufficiency Training Project, a series of workshops run in 1978-81 in 36 cities around the United States to find leadership already doing grass-roots fund-raising and help them share ideas.

The one problem common to almost all fund-raising groups is fear, "conquering the bear," says Flanagan. Her "Fear Formula":

"Fear is the parent of procrastination. Procrastination is the thief of time. Time is money."

Persons interested in more information on The Youth Project and its programs may contact them at 1555 Connecticut Ave. NW, Washington, D.C. 20036.

Joan Flanagan charges $500 per day, plus expenses, for workshops. Her consultation fees may be negotiated on a per-day or retainer basis. She may be reached at 2660 N. Burling Ave., Chicago, Ill. 60614.