Key Takeaways
- A government shutdown occurs when congress cannot pass legislation for federal agency funding
- During this time, SBA loans cease being processed
- Submit your loan application anyway and stay responsive with your loan service provider so you’re first in line once processing resumes
When the federal government shuts down, small business owners looking to secure SBA 7(a) loans are among the first to feel the impact.
Whether you’re planning to expand, purchase materials, or boost working capital, understanding how a shutdown affects SBA lending is essential to navigating this period of uncertainty.
Whether you’re planning to expand, purchase materials, or boost working capital, understanding how a shutdown affects SBA lending is essential to navigating this period of uncertainty.
What Is a Government Shutdown?
A government shutdown occurs when Congress fails to pass legislation to fund federal agencies.
Without an approved budget, nonessential government operations pause, and thousands of federal employees are furloughed.
While essential services like law enforcement and air traffic control continue, agencies like the Small Business Administration (SBA) are significantly affected.
Without an approved budget, nonessential government operations pause, and thousands of federal employees are furloughed.
While essential services like law enforcement and air traffic control continue, agencies like the Small Business Administration (SBA) are significantly affected.
How the Shutdown Affects the SBA
During a shutdown, the SBA loan application process pauses, and no loans can be approved during this time.
Lenders with delegate authority—meaning special permission to approve SBA loans independent of the SBA—must also cease loan approval.
What This Means for Borrowers
If you’re a small business owner planning to apply for an SBA 7(a) loan, here’s what you need to know:
- No new applications will be processed: Whether you’re working with a standard lender or one with delegated authority (PLP status), new loans cannot be approved during the shutdown unless they already have an SBA loan number. If an SBA loan number has been assigned to a loan, then the lender can proceed with closing and disburse the funds.
- Existing loans will be delayed: Even if your loan was in progress before the shutdown, final authorization or disbursement will be postponed.
- Loan servicing continues: You must continue making payments on existing SBA loans.
- Backlogs are likely: Once the shutdown ends, expect delays as the SBA works through a flood of pending applications.
How to Proceed During a Shutdown
While the SBA’s lending operations are paused, there are proactive steps you can take:
- Prepare Your Application Now
- Communicate With Stakeholders
- Stay Informed
Use this time to gather financial documents and work with your lender or service provider to ensure your application is SBA-ready. This will help you move quickly once operations resume.
Let sellers, landlords, and partners know that funding timelines may shift. Clear communication can help manage expectations and avoid complications.
Monitor updates from your lender or service provider like NEWITY. They often provide real-time guidance on how to navigate shutdown-related disruptions.
By understanding how SBA operations are affected and taking proactive steps during the government shutdown, you’ll be better positioned to move quickly once government operations resume.
Interested in finding out how much you could qualify for? Apply now and find out in just 10 minutes!
Interested in finding out how much you could qualify for? Apply now and find out in just 10 minutes!
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