Adaptive funder strategies for supporting nonprofits in 2025 amid funding uncertainty 

In 2025, federal and state funding shifts are significantly disrupting the nonprofit sector. Direct grant recipients and organizations reliant on upstream funding are facing paused projects, staff reductions, and program instability; many are struggling to sustain operations. In response, foundations across the country are embracing adaptive funder strategies, demonstrating commitment, flexibility, and trust. 

At Foundation Source, we observed that foundations that continued to make grants (and in some cases even increased their distributions) during the market instability of the 2020 pandemic emerged even stronger. The same cannot be said for nonprofits whose operations entirely depended on external funding. Learning from that example, some private foundations are responding proactively in supporting nonprofits this year. Here are several adaptive funder strategies we’re seeing:  

1. Staying the course with existing grantees 

While it may not seem “proactive” on the surface, simply continuing to partner with established grantees helps anchor the shared work funders and nonprofits want to see completed. It ensures grantees’ confidence in their funding partnerships and enables them to continue their important work while also securing alternative sources of funding. 

Some foundations are going a step further and increasing their support of existing grantees to help make up for shortfalls in funding from other sources—increasing the size of grants to individual grantees, increasing their budgets, and/or giving above the 5% minimum distribution requirement. 

In one example, a private foundation’s board was alerted by several arts grantees that their National Endowment for the Arts grant awards were rescinded or not distributed as planned. These grantees had already begun project development (e.g., hiring staff, stage design, performance announcements, and tickets sales) and were now seeking emergency support. The board chose to exceed the foundation’s annual grant budget by making additional one-year general operating support grants, which allowed grantees to address budget gaps or revise the scope of their projects and/or their long-term program strategies. 

2. Increasing flexibility through general operating support 

Some funders are engaging in open dialogue with their grantees about restructuring their budgets in the face of funding cuts. A grant’s original purpose may no longer be relevant if the recipient organization has lost a significant percentage of their overall budget, so many funders are allowing grantees to convert the structure of their grants from project support to general operating support. This offers the greatest amount of flexibility over time, enables grantees to make choices in a rapidly changing environment, and reinforces trust between funder and grantee.  

When funders are flexible about how their grant funding is utilized, nonprofit leaders can make strategic decisions about which programs to pursue and which to put on hold. By offering flexibility and supporting those choices, funders also signal confidence in their leadership and decision making.  

For example, a family foundation that provided a restricted grant for a climate change initiative learned of federal and state funding cuts that would challenge their grantee’s ability to continue the project—and a significant portion of its program activity. After discussing options with the grantee for restructuring the initiative, the foundation redirected its restricted grant to general operating support, which allowed for a more flexible budget in support of reimagined program activity and sustainability. 

3. Helping to stabilize the sector with multiyear grants 

The need to seek renewed funding on an annual basis can be destabilizing for the nonprofit sector, particularly as funding cuts are occurring. This short cycle of funding affects an organization’s ability to plan, implement strategy, and retain high-quality staff. Foundations are addressing this challenge by offering multiyear grants to trusted grantee partners. 

We work with a corporate foundation committed to meeting needs in several South Carolina counties where its consumers and employees live. It received grantee requests for guidance and support as they navigate government funding and policy changes. In response, this foundation changed its one-year funding policy to a multiyear grantmaking strategy that reinforces its commitment to the community to provide steady and long-lasting support.  

4. Engaging in open and transparent communication

An essential practice that makes the adaptive funder strategies above possible is prioritizing open and transparent communication with grantees. By inviting honest conversations, funders gain a better understanding of the real-time challenges nonprofits are facing. These discussions about shifting priorities allow for collaborative problem solving, including grant term revisions, timeline extensions, or budget reallocations. Importantly, they signal the funder’s trust and confidence in the grantee’s leadership and promote more responsive use of philanthropic resources. 

A sector-wide moment for adaptive funder strategies 

Recent developments are prompting foundations to reflect on their role in stabilizing the nonprofit sector and responding to grantee needs in the face of unprecedented funding uncertainty. We’ve observed that funders are adapting by employing practical strategies that reinforce partnership, flexibility, and continuity. While there may be varying paths and tools available to foundations depending on their resources, goals, and community needs, adaptive funder strategies are a critical part of the response to changes in federal and state funding.  

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