Help for Heroes is undergoing an emergency restructure in order to continue delivery of its services to veterans.
The charity, which supports wounded service personnel and their families, has said 142 of its staff roles are at risk as it anticipates a 30% reduction in regular income due to the ongoing economic recession.
It relies on donations for 97% of its funding, but has seen all face-to-face fundraising opportunities cancelled or postponed since the coronavirus pandemic began.
Chief executive Melanie Waters said the decision was extremely tough but the charity had a responsibility to ensure that the lifelong support promised continued.
The charity says demand for its services has risen significantly during lockdown with a 33% increase in new people asking for support with their mental health in May and June 2020.
Physical health referrals were also up during the lockdown, seeing an increase of 30%.
In May, the Government announced £6 million of emergency funding to support military charities struggling during the COVID-19 lockdown.
Three Help for Heroes recovery centres in Yorkshire, Devon and Essex will no longer be operating for the foreseeable future, as the charity shifts to face-to-face community and online-based support.
The charity had to furlough nearly 40% of its staff for up to seven months earlier this year.
It employs 319 staff across the UK, many of whom provide support to personnel and their families.
Speaking to Forces News Ms Waters said a restructure had to be undertaken in order to continue their commitments to veterans.
"We’re taking these actions to make sure that we protect the very services that are there to help our wounded veterans," she said.
"As you can imagine our staff and our beneficiaries, our veterans, are sad that we’re having to do this, but what we’re trying to do is to transform our recovery services into a community model so we can still continue to reach them - we don’t want to stop those recovery services."
Speaking on the potential future of Help For Heroes, Ms Waters was unable to rule out the possibility of a merger with other charities in order for them to stay afloat.
"I believe that we all as charities have a duty to work out how we deliver what we can to best effect, and if that means we have to make difficult decisions, as we have in these last few months, then we do that.
"If that means we can work more effectively with other charities or other organisations, I believe we should do that.
"We’re all talking as charities about how we can be more effective together, it makes absolute sense."
Chairman of the Confederation of Service Charities (Cobseo) General Sir John McColl said the service charity sector had been "significantly affected" by the coronavirus pandemic.
"The service charity sector provides vital lifesaving and life-enhancing support to serving personnel, Veterans, and their families, and this must continue," he said.
"It remains absolutely essential that there is ongoing suitable government support to ensure that the sector can continue to adequately support all of the Armed Force Community."
Cover image: Help For Heroes.