With government funding less predictable, nonprofit boards and Executive Directors have become much more conservative about their finances.
At Financing Solutions, we see this firsthand. We have been providing lines of credit to nonprofits since 2012, and our data involving 8,236 nonprofits shows a noticeable change in financial behavior since 2025.
Nonprofits are conserving cash, delaying new projects and borrowing less.
But there is another trend we are seeing that I believe is particularly important: nonprofits are increasingly thinking about having access to capital before they actually need it.
That distinction matters.
Having a line of credit doesn’t mean a nonprofit needs to borrow money. A line of credit can simply be a financial backup plan that sits unused until an organization experiences a cash-flow gap.
At Financing Solutions, there is no cost to establish or maintain a line of credit. The nonprofit only pays when it actually uses the money.
And our historical data shows how valuable that backup can become: 90% of nonprofits that establish a Financing Solutions line of credit end up using it within 12 months.
The lesson isn’t that nonprofits should borrow more.
It’s that during an uncertain funding environment, having access to money before you need it may be one of the most conservative financial decisions a nonprofit can make.
Summary
What Has Changed Since 2025?
When the Trump administration began making significant changes to federal funding in early 2025, I expected nonprofits to begin relying more heavily on their existing lines of credit.
That hasn’t happened.
The percentage of our nonprofit customers accessing their lines of credit has remained approximately the same over the past two years.
Even more interesting, before 2025, nonprofits using their Financing Solutions lines of credit were accessing approximately 20% more of their available credit than they have since the beginning of the current Trump administration.
In other words, nonprofits aren’t borrowing more because they’re uncertain about the future.
They’re borrowing less.
Based on our conversations with nonprofit leaders, we believe boards and management teams have shifted into a more defensive financial posture.
They are conserving cash.
They’re delaying new programs.
They’re postponing hiring and capital expenditures.
They’re trying to make the money they already have last longer.
From a financial-management standpoint, much of that makes sense.
But conserving cash and having access to additional liquidity aren’t mutually exclusive. In fact, they can be two parts of the same conservative financial strategy.
Applications Dropped 20% in 2025
We have also seen a significant change in applications.
Applications for nonprofit lines of credit declined approximately 20% in 2025.
We’ve seen a slight increase in applications during 2026, although they have not yet returned to previous levels.
Initially, I found this surprising.
If nonprofit leaders are more worried about future funding, wouldn’t more organizations want a financial backup plan?
But the conversations we’ve had with Executive Directors and CFOs helped explain what may be happening.
When boards become concerned about future funding, their first reaction is often to reduce expenses rather than increase access to capital.
That’s understandable.
However, there is a potential problem with waiting.
The easiest time to establish a line of credit is usually when you don’t need one.
When your nonprofit has cash in the bank, funding is arriving normally and your financial statements are strong, you have time to evaluate your options and establish a backup plan.
Once a major grant has disappeared or you’re struggling to make payroll for your nonprofit, your financial condition may have changed—and your options can become much more limited.
We’re Seeing Nonprofits Apply Before They Actually Need the Money
Another change since 2025 may be even more revealing.
Nonprofits that apply for a Financing Solutions line of credit are taking longer to complete the process and establish the line.
Historically, many organizations came to us with a specific cash-flow problem.
A government reimbursement was late.
A grant hadn’t arrived.
Payroll was approaching.
They needed access to working capital relatively quickly.
Increasingly, we’re speaking with nonprofit leaders who don’t have an immediate cash-flow problem.
Instead, their thinking is closer to:
“We’re okay today, but we’re concerned about what could happen six months from now.”
I actually believe that’s a healthier reason to establish a line of credit.
They’re not borrowing because they’re in trouble.
They’re creating a financial backup plan while they’re financially healthy.
And because a Financing Solutions line of credit costs nothing to establish or maintain, they don’t have to predict exactly when they’ll need it.
If they never use it, there is no cost.
If they do need it, the money is already available.
90% of Nonprofits Eventually Use Their Line
This is where one of the most interesting statistics in our data becomes important.
Of the nonprofits that establish a Financing Solutions line of credit, 90% use the line at least once during the first 12 months.
That doesn’t mean these nonprofits are financially unhealthy.
Quite the opposite.
Cash-flow gaps are a normal part of operating many nonprofit organizations.
A government contract may reimburse expenses 30, 60 or 90 days after the nonprofit has already spent the money.
A committed grant may arrive later than expected.
A nonprofit may have a three-payroll month.
An unexpected repair may occur.
Or an organization may have an opportunity to launch a program before the funding supporting it arrives.
The challenge isn’t necessarily a lack of revenue.
It’s timing.
And timing is exactly what a line of credit is designed to solve.
Government Funding Delays Can Turn a Timing Problem Into a Crisis
The funding environment since 2025 has made that timing issue more important.
Nonprofits have faced canceled grants, delayed government reimbursements, funding freezes and uncertainty about whether expected funding will ultimately arrive.
For an organization with substantial cash reserves, a 90-day delay may be manageable.
For a nonprofit operating with a relatively small cash cushion, the same delay can create a serious problem.
We have unfortunately seen this firsthand.
Since 2025, Financing Solutions has seen more nonprofit customers close than we saw during the previous 15 years we have been in business.
This is an observation from our own customer base, not a claim about nonprofit closures nationally.
But the change has been noticeable.
When organizations that closed have discussed their circumstances with us, the most common reasons they cited were the loss of government grants or significant delays in receiving government funding.
A line of credit cannot solve the permanent loss of a major source of revenue.
But it can be extremely useful when the problem is when money arrives rather than whether it will arrive.
That distinction is important.
A Line of Credit Is Not the Same as Debt
I think this is one of the biggest misconceptions nonprofit boards sometimes have.
Establishing a line of credit doesn’t mean the organization is taking on debt.
Using the line creates debt. Having the line available does not.
Think about it as another component of your nonprofit’s financial contingency plan.
You maintain cash reserves even though you hope you don’t need to spend them.
You maintain insurance even though you hope you never file a claim.
And you can maintain access to a line of credit even though you hope your cash flow remains strong enough that you rarely need it.
The difference with a Financing Solutions line of credit is particularly important: there is no cost to establish it and no cost to keep it available. You pay only when you use the money.
That means an organization can establish the line while its finances are strong and simply leave it unused until a cash-flow need develops.
What Our Data Is Really Telling Us
Looking at the behavior of 8,236 nonprofits, I don’t believe the important story is that nonprofits should be borrowing more.
The story is that nonprofit leaders are becoming more cautious and more focused on financial resilience.
They’re conserving cash.
They’re being selective about new projects.
They’re borrowing less.
And some are putting access to working capital in place today because they recognize that tomorrow has become harder to predict.
I think that’s smart financial management.
You can’t control whether a government reimbursement arrives 60 days late.
You can’t control whether a major donor delays a payment.
You can’t control when an unexpected expense occurs.
But you can control whether you have a backup plan before any of those things happen.
For nonprofits, the best line of credit may be the one you establish when you don’t need it—because that’s exactly when you have the luxury of planning ahead.
Stephen Halasnik is a Managing Partner of Financing Solutions, a direct lender to nonprofits and small businesses. Over the last 25 years, Stephen has built 7 companies and he passionately believes that every nonprofit and business should have a line of credit to turn to as a cash back up plan. That belief, learned over years of working with banks for his own business needs, drove him to start Financing Solutions so credit lines could be easier to set up and less expensive.
