Nordstrom family members told department store's board they have suspended their efforts to take the retailer private for the rest of this year.
The Nordstrom family said it plans to resume the efforts after the holidays.
Nordstrom shares were down more than 6 percent on Monday in the wake of the report.
The Nordstrom family group, which owns 31.2 percent of the 116-year-old retailer, said in June it was looking to take Nordstrom private and had appointed an independent special committee to evaluate the offer.
The retailer was hoping that as a private company, Nordstrom would be able to make investments that would help it adapt to the changing retail landscape without worrying about short-term shareholder reaction.
It had been in talks with private equity firm Leonard Green to provide financing on the deal, CNBC earlier reported, but had trouble completing a financing package for the deal, sources previously told CNBC.
Banks in recent months have become skittish as the retail landscape has worsened and were wary of difficulties in syndicating the debt, reminiscent of banks' struggles with Sycamore Partners' $3 billion purchase of department store operator Belk.
Leonard Green, on the other hand, likewise has limits in the amount of equity it was willing to put in and the debt financing rate it was willing to swallow, the sources said.
The holiday season served as an informal deadline for all financing parties, because banks tend to avoid syndicating debt during the the unpredictable holiday season.
Nordstrom is not the only retailer eager to escape the public spotlight only to find itself challenged to obtain the necessary financing to do so.
The executive chairman Hudson's Bay Company, owner of Saks and Lord & Taylor, has also been trying to raise equity to fund that company going private, though sources caution he faces steep odds in doing so.
Several private equity-backed retailers have buckled under the weight of large debt loads that have hampered their ability to invest in e-commerce and adapt to the rapidly changing retail industry. Private equity-backed Payless ShoeSource and Gymboree filed for bankruptcy earlier this year, while Neiman Marcus is working with restructuring advisors.