Nursing and care homes in Stamford, Bourne and the Deepings say a one per cent increase in funding from Lincolnshire County Council is below the inflation rate of 3.83 per cent and means they cannot cover their costs.
They are disputing the offer and many are considering legal action, but have warned that residents' families could be asked to pay more as a last resort.
The Orders of St John Care Trust is a not-for profit organisation which runs the Whitefriars home, in Ryhall Road, Stamford, and Digby Court care home in Christopher's Lane, Bourne. Finance and business manager Leanne Olding said: "We would have to review our fees and look at what we are charging people. Worst case scenario it could mean we have to increase our fees.
"We will still continue to maintain the highest standard of care for all of our residents. We won't compromise on care."
She said the shortfall would be "significant" as the trust has 400 council funded beds across its 16 care homes but added it was confident a court would rule in its favour.
Coman Kenny, PR manager at Sense which operates Manor Court care home in Church Street, Market Deeping, and a care home in Horsegate, Deeping St James, said the charity might have to ask for more donations.
He said: "As a charitable organisation, a funding increase of one per cent is unacceptable especially when inflation is clearly more than that and the cost of essentials like food is rising.
"The effect is that we have to ask for even more donations to maintain the quality of care we offer to deafblind people."
Care home bosses met last month to discuss their options and many agreed to meet county council officials. The fees of about 4,000 people are funded by the council, either in full or partially, with top-up payments being made by some families.
Chairman of the Lincolnshire Care Association, Nick Chambers, said: "Given the rising costs of things like fuel and food, you can imagine the concerns that care providers have when they learn that their costs are going up by 3.66 per cent. The council is in breach of its contractual agreement."
Sandra Wilson, manager of Qu'Appelle Residential Home in West Street, Bourne, said she had decided to cut back her refurbishment budget to plug the gap rather than persist with the dispute.
She said: "Things are going to be tough this year for all the care homes, but even with the pressure of all the care homes the council does not seem to be budging."
She said that the county council were suggesting introducing additional top up fees for families, but that the firm had ruled this out.
A spokesman for Lincolnshire County Council said it was liaising with care home providers and would be writing to them.