Grant Funding 2025: Year in Review & 5 Strategies for a Competitive Edge

"When the winds of change blow, some people build walls and others build windmills." - Chinese Proverb 

If 2025 taught nonprofit professionals anything, it's that adaptability isn't optional anymore; it's survival. 

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Recapping a Brutal Year

Let's not sugarcoat it: 2025 was a brutal year for the nonprofit sector.

Federal funding cuts sent shockwaves through the nonprofit sector, creating what I'd call a 'reverse trickle down effect'. Organizations that had long relied on government dollars suddenly found themselves locked out and forced to pivot toward foundation and corporate funding to stay afloat. The result? An unprecedented surge in competition for private foundation dollars. 

The numbers tell the story. According to the Urban Institute's 2025 report, one-third of nonprofits experienced government funding disruptions in the first half of the year alone, with 21% reporting outright loss of funding and 27% facing delays, pauses, or freezes. The Center for Effective Philanthropy found that 93% of nonprofit leaders were actively pursuing funding from new funders or donors, with many of them now competing head-to-head with larger, more established organizations that previously operated in an entirely different funding lane.

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When Funders Hit Their Limits 

The pressure wasn't one-sided. Foundations felt it too. 

Colleagues across the field shared stories of grant portals closing early because funders were simply overwhelmed by application volume. The Nonprofit Finance Fund's 2025 survey confirmed what many of us experienced firsthand: 48% of respondents reported that average grant sizes had shrunk, and 30% said wait times for funding decisions had gotten longer. 

In response, many funders shifted their processes entirely. Multi-phase applications (requiring a Letter of Inquiry before an invitation to submit a full proposal) have become increasingly common. Some foundations moved to invitation-only grantmaking altogether. The days of firing off cold applications and hoping for the best? They're fading fast. I expect this trend to accelerate in 2026. Relationship-building and strategic positioning will matter more than ever.

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5 Strategies for a Competitive Edge in 2026 

So, where does this leave nonprofit professionals as they head into the new year? Here are five strategies to strengthen your positioning and stay competitive in an evolving landscape: 

1. Strengthen Your Data and Outcomes Infrastructure 

Funders don't fund ideas. They fund evidence, execution, and confidence that the work will succeed. If your organization isn't already tracking quantitative outputs, collecting pre- and post-program data, and documenting measurable outcomes, now is the time to invest in more robust data-collection and evaluation tools. Aim for at least 12–18 months of outcome data to share with funders. This information will give your applications a critical competitive edge when reviewers are comparing you against a flood of other applicants. 

2. Stop Applying for Every Grant You Find 

Volume isn't a strategy, alignment is. One of the top reasons funders reject proposals is that the request falls outside their stated interests, or the applicant didn't follow guidelines. Focus your energy on foundations where there's genuine mission alignment. Research their giving history, geographic priorities, and funding patterns. If the funder allows it, request a meeting before you apply. In today's climate, cold applications simply won't cut it. 

3. Match Your Ask to Your Track Record

Your ask should reflect reality, not just ambition. Align your request with the funder's history of awards to organizations similar to yours in age, capacity, and budget size. Requesting an amount that's wildly out of step with your track record or the funder's typical grant size can signal a lack of organizational sophistication and credibility.

4. Diversify Your Funding Sources 

If 2025 was any indication, relying heavily on any single funding stream is a risk most organizations can't afford. The Nonprofit Finance Fund reported that 52% of nonprofits ended the year with three months or less of cash on hand. Grants are essential, but they're typically restricted and time-limited. Now is the time to expand donor engagement, cultivate individual giving, explore earned revenue, and build a funding mix that can weather disruption. 

5. Invest in Community Relationships 

Strong local connections aren't just good practice; they're strategic assets. Build relationships with partner organizations, secure letters of support, and stay plugged into local funding opportunities. Collaborative proposals and community endorsements signal to funders that your work is trusted and embedded in the communities you serve. In a competitive landscape, community support is vital.

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Looking Ahead 

Yes, 2025 was hard, but I've found that difficult seasons have a way of clarifying what matters most: strong programs, credible data, authentic relationships, and the organizational resilience to adapt when the ground shifts beneath us. 

The nonprofits that will thrive in 2026 won't necessarily be the biggest or the most well-resourced. They'll be the ones that invested in their infrastructure, diversified their funding, and approached grant-seeking with strategy rather than desperation. 

The landscape has changed. But for organizations willing to evolve with it, there's still a path forward, and as always, plenty of reason for hope. 

Alexarae Deer is a Grant Consultant at PhoenixFire Strategic Consulting, where she helps nonprofits build grant readiness and develop sustainable funding strategies. 

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Sources: 

Center for Effective Philanthropy. (2025). State of Nonprofits 2025: What Funders Need to Know. Cambridge, MA: Center for Effective Philanthropy. https://cep.org/report/state-of-nonprofits-2025-what-funders-need-to-know/

Nonprofit Finance Fund. (2025). 2025 State of the Nonprofit Sector Survey. New York, NY: Nonprofit Finance Fund. https://nff.org/learn/survey

Tomasko, L., Martin, H., Fallon, K., Kim, M., Faulk, L., & Boris, E. T. (2025, October). How Government Funding Disruptions Affected Nonprofits in Early 2025. Washington, DC: Urban Institute, Center on Nonprofits and Philanthropy. https://www.urban.org/research/publication/how-government-funding-disruptions-affected-nonprofits-early-2025