The nonprofit sector is facing severe financial strain, a consequence in large part of the multibillion-dollar hole left by the Trump administration and its campaign to suspend or claw back funding for institutions perceived as promoting a “woke” agenda.
This loss in federal funding has forced many nonprofit leaders to ask hard questions about how to find new sources of funding, maintain cash flow, and simply keep the lights on.
Recent data confirm the grim picture. According to Bonterra, a software company that serves the nonprofit sector, two-thirds of large nonprofits (those with revenues over $25 million) are suffering some or significant financial impacts due to changes in federal funding. And in a report released earlier this year, the Nonprofit Finance Fund (NFF) found that 36 percent of nonprofits were operating with deficits, more than double the share in 2021. Over half (52 percent) had less than three months of cash on hand, up from 39 percent in 2021.
This loss in federal funding has forced many nonprofit leaders to ask hard questions about how to find new sources of funding, maintain cash flow, and simply keep the lights on.
“No one enters the sector because they want to talk about finance,” Jennifer Talansky, the vice president of marketing and communications at NFF, told NPQ. “It’s not a fun topic. It’s not something people want to spend their time on, and unfortunately you have to.”
While current political and economic circumstances pose challenges, they also present an opportunity for nonprofits to address systemic financial vulnerabilities, some that long predate the current administration.
How to Gain Firmer Financial Footing
The most pressing priority for many nonprofits is finding or growing revenue streams to make up for lost government funding. An important first step—one many nonprofits have already taken—is to systematically review an organization’s operations and to assess its finances going forward.
“There are a gazillion scenarios, and that can feel overwhelming,” said Elise Miller, a senior director in NFF’s community engagement department. “But really you’re thinking about: What are the things that I can shift or that I can influence in my organization? Are there certain kinds of programs that aren’t as essential right now? Instead, you are able to focus on other things that you might be doing really well.”
There is some good news: Private giving—both at the philanthropic and individual levels—remains robust, buoyed in part by a strong stock market.
But nonprofit leaders need to have direct, frank conversations with existing donors, those that have already demonstrated support for the organization. In its survey, Bonterra found that less than half of funders have had meaningful conversations with nonprofit partners about funding changes at the federal level.
“Make sure you’re really having conversations with your board and your funders,” Talansky said. “We have a culture of [presenting only] good news in the sector, and this is not the moment to do that.”
Nonprofits would also do well to expand their revenue sources. This is in part done by relying more heavily on internal networks, support communities, and boards; and being clear about asking for assistance. As Talansky noted, “Lean into the skillset on your board, maybe in a way that you haven’t….If you’ve got people on your board who have a finance or accounting or legal background or marketing communications background, it can help you think about how to tell your story.”
Bonterra found that nearly half of nonprofits rely on just one revenue stream. In a time of lean budgets, however, nonprofits have to take a strategic approach to seeking new funding.
“If you ‘spray and pray’ with grants, you’re not going to be successful,” Scott Brighton, the CEO of Bonterra, told NPQ. “You need to focus, you need to understand the funding appetite of the funders you’re going after, and you need to be able to design your grant proposals informed by that understanding.”
Not surprisingly, Brighton is an advocate for using technology to aid in this process, particularly agentic artificial intelligence (AI), in which users ask AI agents to perform specific tasks. AI can help nonprofits to launch “more effective individual giving campaigns, having the agents go through and look at the behavior of your long tail of donors,” Brighton noted.
A growing array of tools can help nonprofits deploy AI in ways that square with their ethics and missions.
Efforts to improve a nonprofit’s financial stability, however, should not come at the expense of its employees, NFF cautions. Low morale and burnout are long-running problems in the sector, exacerbated in recent years by the pandemic and inflation. According to NFF’s research, 41 percent of nonprofits are able to pay all of their full-time workers a living wage.
Talansky suggests making employee wellbeing part of the discussion with existing donors: “We were just talking to a funder the other day who has largely shifted to giving entirely [to improve worker wellbeing], and also to actively encouraging nonprofits to use that money to support worker wellbeing.”
“We have a culture of [presenting only] good news in the sector, and this is not the moment to do that.”
Adapting to a Hostile Economic and Political Landscape
As the one-year mark since Donald Trump’s reelection approaches, there are indications that some nonprofits, funders, and philanthropies are adapting to the new political reality.
In its survey, Bonterra found that majorities of nonprofits were responding by seeking private foundation grants (60 percent), informing donors of increased needs (60 percent), advocating at all levels of government (56 percent), and strengthening community partnerships (55 percent).
Some funders also appear to be embracing their roles as counterweights to Trump administration policies and have increased funding for the organizations they support, no questions asked.
“We’ve heard about funders that have just given a flat increase in all of their grant sizes to their grantees, without asking, or sent a renewal check to their grantees without asking for an application,” said Miller.
But, Miller cautioned, such examples do not represent “a sea-change shift across the sector.”
Another potentially positive trend is an increase in corporate giving. Benevity, another software provider for the nonprofit sector, recently reported that 51 percent of corporate giving (also referred to as corporate social responsibility) departments intended to increase their granting budgets in 2025.
At the same time, corporations, as well as large foundations, appear to be more wary of potential political consequences for the causes they support. The Benevity report noted a shift away from BIPOC, climate, and international humanitarian aid, with support for such initiatives dropping by seven to 10 percentage points.
Individuals, on the other hand, appear to be less cowed and some may be more motivated to give in response to problems that have been neglected—or even caused—by the federal government.
Analyzing some of the data from its platform, Bonterra found donations surged during the wildfires in the Los Angeles area last January, with a “99% rate of new donors and an average of over 2,500 new donors per day,” according to its report. During the protests against ICE in LA in June, nonprofits saw a “5,445% spike in new donors and a 1,715% increase in total donation volume compared to regular days,” according to the report.
Still, individual giving is not in itself a long-term solution, Brighton noted.
“We really do need consistent strategic funders in order to sustain those programs over the long term,” he said. “And that’s really where the large donors come into place.”
From Brighton’s perspective, many funders are in fact standing firm: “The majority of the leaders I speak with still have deep conviction about what they were trying to accomplish before the current administration. And they’re just trying to navigate it effectively.”
