How a recession impacts nonprofits: What you need to know

A recession doesn’t just affect banks and big businesses—it changes how everyday people live and give. Between late 2007 and early 2009, during the Great Recession, American households lost about $16 trillion in net worth. One in four households lost at least 75% of their savings. 

When families are hit that hard, donations drop, and nonprofits feel the impact right away. Budgets get tighter, programs slow down, and planning ahead gets harder. That’s where strong nonprofit financial management can help. 

In this blog, we’ll talk about what really happens to nonprofits during a recession and what steps you can take to stay steady.

What Happens in a Recession? 

A recession is when the economy slows down for a while. People lose jobs, prices go up, and families stop spending as much. It’s not just a small dip. Things feel tight across the board.

Businesses cut back, layoffs go up, and people save more and spend less. That affects restaurants, stores, and even nonprofits. Donating is no longer a priority when the paycheck is smaller or gone.

When people are struggling, donations drop. During the 2007–2009 recession, total giving in the U.S. fell by 7.0% in 2008 and again by 6.2% in 2009. Nonprofits felt that right away.

That’s why keeping a close eye on your nonprofit finances is important. A slowdown in the economy means a slowdown in giving. If you’re not prepared, it can be hard to keep programs running. But if you understand what’s coming, you can adjust your plans and stay steady.

How Recessions Affect Nonprofit Funding 

Recessions don’t just hit banks and big companies. They impact how nonprofits raise money, too. When the economy slows down, money gets tighter for everyone: individuals, businesses, foundations, and the government. 

Let’s look at what that means for your funding.

1. Individual Donations Take a Hit

Most nonprofits count on regular donations from people in their community. However, during a recession, many families are dealing with job loss, rising costs, or lost savings. 

They cut back on spending, and including giving to nonprofits. In 2008, giving from American households fell 5.7% after inflation, the most significant drop in over 50 years. 

When people are focused on getting through the week, even your most loyal donors may pause their support.

2. Companies Reduce Their Giving

Businesses also start tightening their budgets during recessions. One of the first areas to be cut is charitable donations. 

A 2009 survey found that 59% of corporations reduced their giving, and 40% of them cut back by at least 10%. This means less money for nonprofit events, community programs, or donation matches. 

If your nonprofit relies on corporate sponsors, you may have to find new ways to keep those relationships going—or look elsewhere for support.

3. Foundation Grants Shrink

Many private foundations use investments to fund their grants. When the stock market drops, so does their endowment. That means they have less money to give out. 

In 2009, grant-making by U.S. foundations dropped by 8.4%, or about $3.9 billion. Some foundations paused new applications or offered smaller amounts. 

If you’re applying for grants, you might find the process more competitive with fewer dollars to go around.

4. Government Support Gets Delayed or Cut

Nonprofits that rely on public funding may face delays in payments or budget cuts. When local or federal governments tighten their belts, it often affects social services. 

Unfortunately, those are the times nonprofits are needed the most. You may have to deal with unpaid contracts, slower approval times, or fewer grants.

During these times, nonprofit financial management helps you plan ahead. You might not control the economy, but you can build a plan that helps your team keep going, even when funding shifts.

Program and Service Cuts

Programs often take the first hit when funding drops. That’s hard, especially when the people you serve need help the most. Many nonprofits are forced to shrink or pause services during a recession, even if demand rises.

1. Less Money, Fewer Programs

Reduced funding means some programs can’t continue at the same level. If you rely on grants or donations to run community meals, after-school activities, or shelter services, a funding gap might leave you no choice but to pull back. 

For example, during the 2008 financial crisis, several food banks across the U.S. had to limit the amount of food they gave per household. With fewer dollars, they couldn’t keep up with the need and rising costs.

2. Strain on the Mission

Nonprofits often make hard choices about which areas to focus on and which to pause. That means some parts of your mission take a back seat. 

A youth center may have to cancel its college prep workshops to keep its tutoring program running. It’s still doing good work, but not everything it hoped to do.

Over time, this kind of shift can change how your nonprofit is seen in the community. People may stop turning to you for services you used to offer. That can be tough to rebuild later, even when funding returns.

3. Smaller Staff, Bigger Workload

Cuts to services often come with staffing changes. You might have to lay off team members, freeze hiring, or reduce hours. That puts pressure on the people who stay. 

They take on more tasks, work longer hours, and often burn out. It’s about losing knowledge and relationships built over the years.

Let’s say your nonprofit runs a senior support program. If you lose half your outreach staff, home visits get delayed, calls go unanswered, and seniors feel the gap. The work still matters, but it’s harder to do well with fewer hands.

Strong nonprofit finances can help soften these kinds of cuts. That doesn’t mean having a huge reserve, but tracking spending, setting priorities, and making changes early can keep things from falling apart.

A recession tests more than your budget—it tests how you keep showing up, even with less.

Demand for Services Goes Up 

During a recession, nonprofit budgets often shrink, but community needs don’t. In fact, they grow. 

More people are looking for help with basic things like food, housing, and medical care, and families who never needed support before may now be reaching out.

1. More People Asking for Help

Food assistance is one area that sees a big spike. In 2008 and 2009, food banks across 40 U.S. cities reported a 31.9% rise in funding. 

That might seem like a good thing, but it happened because so many people needed food. The demand pushed nonprofits to stretch their supplies and operations to new limits.

In 2020, Feeding America shared that 60 million people turned to food banks and pantries,a 50% increase over the year before. This shows just how quickly the need can rise during a downturn. 

The same pattern happens with housing support, mental health care, and other critical services.

2. Teams Face More Pressure

As demand grows, nonprofit staff and volunteers feel the strain. There are more requests to respond to, longer hours, and more stress. Burnout becomes common. 

People want to help, but the workload becomes too much. And when team members leave or reduce their hours, it only makes the situation harder.

Having a plan makes a difference. Good financial management for nonprofit organizations helps teams understand their resources, where they can adjust, and how to keep services going. 

Recessions don’t slow down the need for help; they speed it up. Nonprofits that prepare early and stay flexible are better able to keep up with what their communities need most.

Nonprofit Financial Management During Recession 

Recessions make funding unpredictable. Smart nonprofit financial management helps you stay steady and keep your work going.

1. Why Liquidity and Reserves Matter

Liquidity means having enough cash to cover your basic needs, such as rent, staff pay, and core programs. 

It’s your safety net. Without it, a delayed grant or donation drop can cause real damage fast. Yet, 45% of nonprofits don’t have any emergency fund at all.

Let’s say your nonprofit depends on an annual fundraising gala that brings in $100,000. If a recession hits and it gets canceled, having at least a few months of reserve cash can help you avoid panic decisions like cutting key staff or halting services. It gives you breathing room to adjust.

2. Track Cash Flow Weekly or Monthly

During uncertain times, you can’t afford surprises. Track your income and expenses often, not just once a quarter. Even a basic spreadsheet can show you trends like donation slowdowns or rising utility bills.

Take a food pantry that starts spending more on supplies as demand grows. If they wait too long to notice, they may end up short at the end of the month. 

But if they’re tracking weekly, they can contact donors or shift spending before things get out of hand.

3. Cut Costs Without Hurting the Mission

Recessions call for tightening the belt, but not at the cost of your impact. Cut what’s not tied to your mission. 

Maybe switch from printed newsletters to email, pause travel, or renegotiate vendor contracts.

For example, a youth program might skip buying new office furniture and instead use that money to keep weekend classes running. The point is to protect what your community relies on.

4. Plan for Best, Middle, and Worst Cases

Scenario planning keeps you ready for different outcomes. You don’t need exact numbers, just clear ideas of what each case looks like and what steps to take.

Say your current donations are $200,000 a year. What happens if that drops by 10%? What if it drops by 40%? Having a plan for each case makes decisions easier when the time comes. 

You won’t be guessing—you’ll be ready.

5. Consider Outsourcing Certain Roles

Full-time salaries come with a lot of fixed costs. For roles that don’t need daily attention, outsourcing can help. You might bring in a part-time bookkeeper instead of a full-time finance manager, or hire a freelance graphic designer only when needed.

This gives you flexibility. If income dips, you won’t have to make tough layoffs; you can just pause or scale back outsourced tasks.

It’s about keeping your eyes open, adjusting quickly, and focusing on what matters most—serving your community without losing your footing.

Strategies to Stay Mission-Focused in Tough Times 

These strategies can help you stay grounded, even when everything else feels uncertain.

1. Sort What Truly Matters

You can’t do it all, especially in a downturn. So start by sorting your programs into two groups, must-haves and nice-to-haves. The must-haves are the ones tied directly to your mission.

If your nonprofit supports families in crisis, housing help will likely stay, while community events might be suspended.

It is all about protecting the work your community depends on the most.

2. Trim the Clutter Behind the Scenes

Tight budgets don’t just call for fewer expenses but smarter ones. Look at your day-to-day tasks. Are there steps that take too long or tools you rarely use? 

If you’re using five spreadsheets to track donations, consider using one shared file or a free CRM to do the same job.

Even simplifying your expense approval process can save time and reduce stress across your team.

3. Talk More, Not Less

When things feel uncertain, people tend to wait. Staff wait for updates, and volunteers wait for direction. Don’t let silence create confusion. Instead of waiting for perfect answers, focus on short, honest check-ins. Share what you know, even if it’s small.

For example, a five-minute Friday email that says, “Here’s what’s happening, here’s what’s next” helps everyone stay aligned and prevents morale from slipping.

4. Back Every Move with the Numbers

Good instincts matter, but they’re stronger with facts. Financial planning helps you test ideas, prepare for cuts, and stay ahead of risks. To avoid surprises, you’ll need to stay close to your numbers.

Strong financial management for nonprofit organizations doesn’t mean you won’t face challenges—it means you won’t be caught off guard. When the mission is clear and the plan is steady, you can keep moving forward.

How to Keep Donors Engaged During Recession

• Let donors know what’s changed. Share what you’re doing differently because of the recession.
• Be honest if you’ve paused a program or shifted focus. People respect transparency.
• Use plain words. Keep messages simple so donors understand the situation quickly.
• Send quick updates more often—like a short email or social post once a week.
• Share one real story of someone your nonprofit helped, even if the story is small.
• Tell donors what you can do right now, not just what you can’t.
• Offer low-cost ways to stay involved, like social shares or volunteer shifts
• Ask for input or feedback on small decisions—they’ll feel more connected.
• To invite replies, ask one clear question, like “What matters most to you about our mission?”
• Keep showing up. Even a simple “we’re still here” message keeps the connection strong.

Focus on Technology and Fundraising Tools

Even during tough times when funds are low, one thing can still help you raise money without costing a penny—BetterWorld.

With our Modern Fundraising Tools and Online Fundraising, you don’t need a big budget to run an auction, raffle, or event. You can do it all for free, and your donors can join in from the comfort of their homes.

Our Donation Forms can also help you raise up to 30% more. In one place, you can set up monthly giving, recurring donation prompts, and more.

Sign up or request a demo today to see how BetterWorld makes it easy to raise funds without spending anything.

Find out How GYIFT Foundation Raised Over $20K With BetterWorld.

Plan for the Next Downturn 

Recessions don’t last forever, but they do come back. The best time to get ready for the next one is now. A little planning today can help you stay steady tomorrow.

1. Set Aside a Little, Often

Reserves don’t have to be built overnight. Start by saving a small amount each month. Even a few hundred dollars can make a difference during a slow period. 

If you receive a one-time donation or unexpected grant, consider putting a portion aside. Building a safety net slowly is easier than scrambling when things fall short.

2. Don’t Put All Your Eggs in One Basket

Depending on just one type of income, like one big event or one major donor, can be risky. Try mixing it up. A mix of online donations, small grants, local business support, and monthly givers can give your nonprofit more balance. 

If one stream dries up, the others can help keep things moving.

3. Keep Talking to Donors, Even When You’re Not Asking

It’s easy to stay quiet until you need something. However, strong donor ties are built over time. A short message every month or two with a photo, story, or small win keeps people close. 

Then, if another downturn hits, your donors already know you’re doing the work, and they’ll be more likely to stick with you.

4. Write Down What Worked—and What Didn’t

When the economy shifts, it’s easy to forget the small stuff once it passes. Take a little time now to note what helped most—tools that worked, team decisions that paid off, or mistakes you won’t repeat. 

It’s not about a formal report. Just a clear list that future staff (or even future you) can use next time.

5. Don’t Wait to Plan

Right now, most nonprofits still don’t have a plan for how to handle a recession. In fact, two-thirds don’t have one at all. Creating one doesn’t need to be complicated. 

A simple checklist tied to your budget, key contacts, and priorities is enough to start. That’s the kind of smart step that fits right into steady financial management for nonprofit organizations.

Final Thoughts 

Recessions can make things harder, but they don’t last forever. During these times, many nonprofits face slower donations, tighter budgets, and greater need in the community. That’s why staying steady matters.

Planning ahead helps. So does building strong relationships with your board, team, donors, and community. These people often show up when things get tough, but only if you’ve been talking to them and keeping them in the loop.

Also, take a close look at how your money is being managed. Smart financial management for nonprofit organizations helps you make better choices, avoid surprises, and keep important programs running.

Stay focused on your mission, adjust your approach as things change, and remember that small steps can still move your work forward.

FAQs 

How does a recession impact nonprofit organizations the most?

Recessions often lead to a drop in donations, especially from small donors. At the same time, the need for services like food, housing, and mental health support usually increases. 

Smaller nonprofits or those with limited reserves are especially at risk during these times.

Can nonprofits still fundraise during a downturn?

Yes. Fundraising during a recession is possible and important. Donors still care about the causes they support, and nonprofits that communicate and share their needs often continue to receive donations. 

Some donors may even increase their giving to help during tough times.

Are donors still giving during recessions?

Yes, but giving patterns can change. During the Great Recession, overall donations in the U.S. dropped. However, many donors kept giving, especially to causes they felt strongly about. Major donors often continue their support.

How long does a recession last?

Data from the National Bureau of Economic Research shows that recessions in the past have lasted as little as two months or stretched out for years. But today’s economy differs in many ways, so comparing it directly with earlier downturns is hard.