The impact of the federal government shutdown that started today is obvious for the 800,000 government workers who stayed home from work, or anyone who tried to visit a national park. For small business owners who often turn to the government to help them find funding for their businesses, the effect is less clear.
What is the SBA?
An important source of funding for many small businesses is the Small Business Administration (SBA) loan program, which provides financial help for small businesses who may not otherwise be eligible for bank loans. The SBA doesn’t actually grant loans or funds; instead it helps small businesses successfully apply for certain types of financing by guaranteeing that the loans will be repaid. This means less risk for the banks and so a greater willingness to lend. In 2012, the SBA helped over 75,000 businesses get approved for loans.
What’s shut down at the SBA?
With the government shut down, the SBA is mostly at a standstill. Currently, the only programs still functioning are related to disaster relief, to help people recover from events like hurricanes and floods who are not fully covered by insurance. Business owners who were planning to apply for the other SBA loans will have to wait until the government goes back to work to get the necessary SBA approvals and finalize their loans.
That does not mean that everything has stopped, however.
“While the government shutdown will delay the processing of applications sent to the SBA, most of the work associate with SBA loans is done at the banks before the final application is sent to the SBA. Prospective borrowers should continue to work with their lenders to get all the necessary documents submitted so that they will be ready when the government comes back to work,” advised Ruth Ann Halford, SBA Relationship officer at Fortune Bank in Seattle, WA.
And although new loans are not being finalized right now, any loans already approved will still pay out as planned, since the government is not the actual lender.
Plan to Wait
However long the shutdown lasts, business owners in need of funding should not expect everything to be back to normal right away. The SBA will likely need some time to process all the loan requests that came in while it was closed before it can even start keeping up with any new ones.
“When back up and running, there will be an additional period of catch-up given the huge volume of approval requests coming in to the loan processing centers from the entire country,” said Joan Broughton, SVP, Lending Team Manager at Craft3, a non-profit lender in Washington and Oregon.
Find out more about small business lending from Fortune Bank and Craft3 at Access to Capital – Seattle on Nov. 12.