McGrath, who played 312 times for Rovers between 1954 and 1966, is fearful that the Lancashire outfit are facing the drop into the Championship this season, having spent Christmas at the foot of the table while they are five points adrift of safety with 20 games remaining.
And, he is urging the club's owners to show boss Steve Kean the colour of their money so he can bolster his squad with the players needed to preserve Rovers' Premier League status.
McGrath told the Lancashire Telegraph: "They need experienced players who can come in and play straight away.
"You're talking £5million each in today's game so that's probably about £20million. The owners need to spend money or sell it to new investors who will. The club can't afford to go down. I'd hate to think of the consequences if they did.
"You look at other clubs who have gone out of the Premier League, clubs like Leeds who went down and down, and I think it could be a number of years before Blackburn got back."