Your Nonprofit’s Funding Isn’t Coming Back. Here’s What to Do Instead.
One in five U.S. nonprofits could close by the end of 2027. But cutting costs alone may not be enough to keep their doors open.
In his latest Substack post, Southland Development Authority (SDA) CEO Bo Kemp argues that nonprofits facing shrinking government support need to rethink their business models. Instead of waiting for funding to return.
He drew on his experience with the SDA. And from that experience, Kemp outlines three strategies. Strategies that cover long-term survival. From developing new revenue streams, to forming strategic partnerships, and investing in assets.
The essay expands on ideas featured in his Stanford Social Innovation Review column, challenging nonprofit leaders to think beyond grants and build organizations capable of sustaining themselves.
Your Nonprofit’s Funding Isn’t Coming Back. Here’s What to Do Instead.
By Bo Kemp
This essay is adapted from my Viewpoint column in the Winter 2026 issue of Stanford Social Innovation Review, “How Will Your Nonprofit Survive?”
I have spent the last year watching nonprofits do the thing that feels safest and is actually the most dangerous: hunker down and wait for the funding to come back.
What I have come to believe is that it is not coming back, not on the timeline most organizations are planning around, and for some, not at all.
Most nonprofit leaders assume the current funding disruption is a temporary storm to weather with cuts and patience. But after watching federal agencies essential to nonprofit funding get severely limited or eliminated over the past year, I have reached a different conclusion: the organizations that survive this will be the ones that stop waiting and start building a business model that does not depend on any single funder’s mood.
This matters because, by my estimate, more than 20 percent of US nonprofits will be forced to close their doors by the end of 2027 if they do not change course.
The Moment I Began to See It Differently
In 2019, I helped found the Southland Development Authority, a regional economic development nonprofit serving over 700,000 residents across 45 municipalities in Chicago’s south suburbs. We launched with one full-time employee and a $250,000 budget, just months before COVID shut the country down.
At the time, the plan looked like most nonprofit plans: raise grants, run programs, keep overhead low, hope funding renews. Then the American Rescue Plan Act (ARPA) put a real test in front of us. Thousands of Southland businesses were in jeopardy of closing, and we had the mandate to help them, but not the infrastructure.
The easy path would have been to run a modest technical-assistance program and call it done. Instead, we built something new: a Business Growth Services division that connected local businesses to a network of consulting and service partners, structured so that every dollar spent supported three parties at once, the small business, a local consultant, and a local service provider.
What became clear was that the nonprofits who treated a funding disruption as a mandate to shrink were making the wrong bet. The organizations that treated it as a mandate to build new capability came out the other side stronger, not just intact.
The Problem Beneath the Problem
We usually describe the nonprofit funding crisis as a budget problem. We say organizations need to cut costs, extend runway, wait out the political cycle.
Those moves buy time, but they do not address the fundamental issue. Saving your way through a financial crisis does two things at once: it impedes your ability to execute your actual mission, and it assumes the disruption is temporary. Even a full policy reversal after the 2026 midterms would not undo the structural changes already made to federal agencies. Those take years, not months, to repair.
The real constraint is not cash on hand. It is that most nonprofits have exactly one business model: apply for grants, deliver the program, hope for renewal. When that model’s primary input disappears or slows to unpredictable timing, there is no second lever to pull.
This is why the conventional advice, tighten the belt, cut staff, wait for better days, often produces an organization that survives smaller and weaker, if it survives at all.
This is not a cash-flow problem. It is a business-model problem, and it requires nonprofits to build the muscle every for-profit company already has: multiple ways to generate revenue and strengthen the balance sheet.
The Signal
Nonprofits that treat themselves purely as grant recipients are exposed to every funding shock. Nonprofits that treat themselves as organizations that generate value, through services, partnerships, and assets, have levers to pull when any single source dries up.
When a nonprofit depends on one funding relationship, a policy change anywhere upstream becomes an existential threat. When a nonprofit builds its own revenue engine, forms real partnerships, and owns assets, it can absorb a shock in one place by leaning on strength in another.
The difference is not how much a nonprofit spends or saves. It is whether the organization has more than one way to generate the resources its mission needs.
Once we understand that distinction, the question changes from “How do we cut enough to survive this?” to “What can we build now that makes us less dependent on any one funder?”
The Structure: The Nonprofit Resilience Framework
To make this practical, I think about nonprofit resilience as a three-part framework: innovate, partner, and own.
1. Innovate to grow new revenue.
Ask: What service could we offer today that creates revenue instead of only spending grant dollars?
At the SDA, ARPA funding could have simply flowed through as one more grant program. Instead, we built the Business Growth Services division to advise small and medium Southland businesses, structuring it so every ARPA dollar spent supported a local consulting partner, a service provider, and the business itself simultaneously. That service innovation grew our annual revenue from $250,000 in 2019 to more than $2.2 million by the end of 2022, and it caught Cook County’s attention enough that they increased our funding because of the results.
This is where organizations often default to running the grant exactly as written. Instead, ask what new offering the grant could fund you into building permanently.
2. Build strategic partnerships, up to and including mergers.
Ask: Where on the partnership continuum, from fiscal sponsorship to full merger, could we move to gain scale without losing mission?
Mergers understandably raise concerns for service organizations, but merging is the extreme end of a continuum, not the only option. The SDA started at the lightest end: the South Suburban Mayors and Managers Association served as our fiscal sponsor for our first year, accelerating our access to 501(c)(3) status and administrative support. We later moved to a deeper commitment, an operational agreement to manage the South Suburban Land Bank, which has rehabilitated nearly 200 properties in three years by aligning our missions rather than just sharing costs. We are now evaluating the highest level of commitment, a full merger with other potential non-profit organizations, because of the financial and governance advantages it can offer in this environment.
Without this distinction, organizations tend to see merging as failure rather than as one point on a spectrum of legitimate strategic options.
3. Invest in assets to strengthen the balance sheet.
Ask: What could we own that gives us access to capital a grant application never will?
Bank loans are difficult for any nonprofit to secure, and during COVID, only organizations that could withstand slow reimbursement timing could access the largest ARPA grants. Many service organizations best positioned to use that funding were denied because their financial operations could not match federal compliance timelines. The SDA invested in compliance and regulatory capacity to secure lines of credit from commercial banks and CDFIs, then went further, buying individual houses for redevelopment and rental, and eventually acquiring more than 240 acres of land in partnership with local developers through Horizon South Real Estate our Southland Monarch Fund both SDA related enities. As a young organization with no endowment or office building, we had to build hard assets on purpose rather than wait to inherit them.
This is the point where insight must become structure: proactive asset ownership, not just grant management.
What This Looks Like in Practice
Consider the SDA’s experience with ARPA funding during COVID. From the outside, the assignment looked simple: distribute relief dollars to businesses in jeopardy of closing. The conventional response would have been to run a straightforward grants-disbursement program and report the numbers.
But applying this framework surfaced a different opportunity: rather than just moving money, we could build a permanent service capability. We contacted 10,000 Southland businesses, provided technical assistance to more than 400, delivered strategic consulting to over 125 companies, and helped secure nearly $12 million in COVID relief funding, all while building the Business Growth Services division as a lasting asset rather than a one-time program in the COVID years of the program. We now service more than 1,000 unique businesses each year.
The better course of action was not simply to distribute the grant. It was to use the grant to build infrastructure that outlasted it. That shift moved the SDA from a single-program nonprofit to a multi-revenue-stream organization built to withstand the next disruption, not just this one.
Why This Matters Beyond One Decision
The implications extend beyond any one organization’s ARPA story.
For nonprofit leaders, this means the choice in front of you is not “cut now or cut later.” It is whether you use this disruption to build a second, third, and fourth lever, or wait until the first one you are standing on gives way.
For boards and funders, it means judging nonprofit resilience not just by reserves on hand, but by how many independent sources of revenue, partnership, and assets an organization has built.
For the communities that depend on these organizations, it means the difference between service organizations that disappear when the political winds shift, and ones durable enough to still be there in 2030.
The same principle applies at every level: an organization that depends on one source of strength is fragile no matter how large that source is. Resilience comes from having more than one.
The Move
This week, if you lead, sit on the board of, or fund a nonprofit, take twenty minutes and answer this question: if our largest funding source disappeared tomorrow, what would keep our doors open for the next twelve months?
Then identify: one service you could turn into a genuine revenue stream instead of a grant-funded program; one organization you already work closely enough with that a deeper partnership, even a merger, might strengthen both of you; and one asset, real estate, equipment, a line of credit, you could begin acquiring this year instead of waiting to be granted one.
Do not begin by asking what to cut. Begin by asking what to build.
The objective is not to solve your organization’s entire funding gap this week. It is to identify the first lever you can start pulling.
Final Thought
I began by asking whether nonprofits could save their way through this crisis.
My answer is that they cannot, because saving assumes the disruption is temporary, and the structural damage already done will take years, if not decades, to repair even under the best-case political outcome.
We cannot control federal policy, the pace of a reversal, or when the next disruption arrives. But we can control whether our organization has more than one way to generate the resources its mission needs.
That begins when we stop treating our nonprofit as a grant recipient and start treating it as an organization that builds value.
No single strategy will save every nonprofit. But the ones that combine innovation, partnership, and ownership will be the ones still standing.
A question for you:
What is the one funding dependency your organization has that, if it disappeared tomorrow, would be hardest to replace?
Reply to this email or leave a comment. I read the responses, and they often shape what I explore next.
About Bo Kemp
Bo Kemp is an entrepreneur, investor, civic leader, and life operating architect. He serves as CEO of the Southland Development Authority and hosts The First Million Is Always the Hardest and founder of the ACHIEVE Summit. His work focuses on helping people, businesses, and communities turn potential into agency, ownership, and lasting value.
The views expressed here are my own. They should not be interpreted as official positions of the Southland Development Authority or as legal, tax, or investment advice.
Read More From Bo Kemp
Bo writes regularly about economic development, entrepreneurship, wealth-building and the forces shaping communities like Chicago’s Southland.
For more essays and insights from Bo, follow his Substack here.
About the Southland Development Authority
The Southland Development Authority, a not-for-profit economic development organization, is committed to driving equitable and sustainable economic growth in the South Suburbs of Chicago. Through innovative programs, strategic partnerships, and impactful direct investments, the SDA is building a vibrant, inclusive economy that drives wealth growth for individuals, businesses, and municipalities. Combined with the benefits of the South Suburban Land Bank and the Monarch Fund, the SDA serves as a model for regional development.
