Steps To Take in The Face of Federal Loans and Grants Uncertainty

The nonprofit sector found itself in unprecedented territory on January 27, 2025, when the Office of Management and Budget issued a memo announcing a pause on all federal grants and loans. Many nonprofit organizations rely on federal funding to support their missions, provide lifesaving aid and resources to their communities, and bolster their operations. Though a federal judge has issued a temporary stay blocking the funding freeze and the memo rescinded, the situation remains fluid, and the sector continues to lack clarity on what the future holds. Many nonprofits are looking for short-term solutions to critical funding gaps; others are worried about the viability of funding for long-term program priorities.

At Bryn Mawr Trust, we are committed to long-term planning for our nonprofit clients. In the face of uncertainty, working toward long-term financial sustainability can offer your organization flexibility and choices even when the landscape around you changes.

Here, we highlight a few immediate steps your organization should consider.  

Assess Your Current State

Before making any significant adjustments to revenue sources or operations, ensure you clearly understand your cash flow needs. Conduct a cash flow projection to better understand your next 3-6 months and consider any operational or programmatic changes that your organization can realistically make in the short term.

Identify Resources You May Not Have Considered

Today’s the day to begin building a complete, flexible financial toolkit. A strong financial foundation allows organizations to weather unforeseen risks over time. Consider all the resources available to you as you plan around unreliable revenue sources, ensuring you can continue to provide services to those who need them.

Start by carving out a dedicated emergency fund (also known as an operating reserve) and create a plan to grow it regularly until you have 3-6 months of operating cash on hand. If you’re already there, ensure there’s a plan for when and how it should be used.

Next, consider establishing a line of credit, which will allow you to access cash without having to liquidate other assets. If you have one today, work with your finance team and leadership to establish policies around its use. You may also consider being creative with key donors and exploring opportunities for nontraditional funding, such as a low—or zero-interest loan.

Invite Others to Help

Though this pause in federal funding is at the top of your mind, your donors may not be as well-versed in the implications this has for your organization and your mission. Ensure your donor communications convey urgency. Clearly state how a pause in grants may impact the people and cause you to serve and ask donors openly for flexible funding. For donors who typically allocate their gifts to a specific program, ask if they would consider providing unrestricted funding that you can use in the manner your organization needs most now. Reach out to foundation and corporate partners to strategize together about how they might help.

Resist The Urge to Be Reactive

In the face of uncertainty, it’s easy to consider using investment reserves or endowment assets to fill immediate funding gaps. Though this may be a viable option, and your Investment Policy Statement may explicitly allow tapping your endowment during an unforeseen funding loss, ask yourself if current uncertainty feels short-term or long-term in nature.

As fiduciaries, it’s our job to protect the organization’s future interests, as well as provide for today. Prematurely accessing long-term funds can add further risk to achieving the objectives for both our investment portfolios and the organization itself. Therefore, it is essential that your board and leadership have an accurate understanding of how off-cycle distributions may impact future revenue and growth in your investments.

Maintaining a long-term outlook gives you the best chance to weather uncertainty and volatility in an ever-changing and complex landscape. To better understand the key steps in establishing financial sustainability for your organization,  watch our video on our “Nonprofit Sustainability Ladder”. Our team is here to work with you through this time, and now is the right time to plan for long-term financial sustainability.  As fiduciaries, it’s our job to protect your organization’s future interests and assist in providing for today. Email us at [email protected] or [email protected] to find out how we can help.