The Blue Square Bet North side has an agreement in place with property developer St Mowden to build a new stadium at Nunnery Way however the shortfall in cash means the club can no longer support a bid the planning application to Worcester City Council, which St Mowden need before they can begin development.
The club need £2m for a Blue Square Bet North standard ground and a further £1.26m in infrastructure costs. But they will only have around £1.7m left after paying off their bank debts from the sale of the Lane which need to be out by 2013.
Worcester City chairman Anthony Hampson said: "After many meetings with St Modwen the board of Worcester City Football Club have to report that discussions have broken down over the way the funding gap between the proceeds from the sale of St George’s Lane and the cost of the land, infrastructure and stadium at Nunnery Way can be bridged.
"In these circumstances the board believes it has no alternative but to review the contract entered into with St Modwen with its legal team to ensure it remains in the best interests of the club.
"The board will of course listen to any further funding plans that the developers may wish to put before them but has resolved to investigate other alternatives that may be offered to us.
"With the time constraints that we are now under, the board believes it can no longer safeguard the viability of Worcester City Football Club unless it takes this action."
John Dodds, Midlands Regional Director for St Modwen, said: “With the club receiving less than half of the original £7.4million for the existing ground, they are now looking for the Nunnery Way development to fund the new stadium entirely - this was never the intention and is unrealistic.
“We are disappointed as we have helped WCFC at every stage in their plight and are prepared to honour the agreement in place between us.”