The money, a small percentage of the local authority’s £3.7 million Three Year Strategic Grant, would have covered the building’s basic running costs.
Organiser Darren Snow said: “This is the most worrying period we've had since we opened."
A council spokeswoman confirmed 68 projects across the city had been chosen for the grant.
The final decision will be made on November 12.
Councillor Dee Simson, cabinet member for community affairs , said: “I can’t comment on individual cases but the groups that have been put forward were decided upon by a cross-party advisory group.”