How Will the SBA Loans Shutdown Affect My Business?
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How Will the SBA Loans Shutdown Affect My Business?

(Last Updated On: January 22, 2019)

It’s day 30 of the government shut down and counting. Though government shutdowns are not new to the U.S. political arena, the current one is the longest in modern history!

 

The shutdown has sent ripples of concern throughout different parts of American society – and the small business economy is no exception. Business owners’ heads will be swirling with questions like:

 

  • Is the SBA shutdown going to end anytime soon?
  • How is the activity of SBA loans during the government shutdown going to affect my funding?
  • Will the 2018 government shutdown affect my business?

 

Hold tight, it’s not all doom and gloom. Here we’ll answer all of the above questions and more.

 

Why has the government ‘shut down’?

 

The current U.S. government shutdown is the result of President Donald Trump’s aim to secure funding from the Senate for the construction of a wall along the U.S.-Mexico border. The reality is that while politicians on both sides of the aisle bicker between themselves, the average American business owner is the one caught in the cross-fire.

The SBA approves roughly $500 million worth of new loans every single week, something many business owners have benefitted from. But with the ongoing government shutdown freezing all funding to non-essential government bodies, business funding from the SBA has come to a standstill.

 

The panic caused by the duration of the SBA government shutdown 2019 has started to heat things up – keep reading to find out more about how the government shutdown is affecting your small business…

 

What is the Small Business Administration?

 

First, what exactly is the SBA? For nearly 70 years, the U.S. Small Business Administration (SBA) has helped provide vital government assistance to countless small businesses in a variety of ways, but mainly through:

 

  1. Business Financing
  2. Entrepreneurial Development
  3. Government Contracting
  4. Advocacy

 

In short, the SBA helps small businesses get the money, training, government connections, and legal representation they need in order to remain a productive part of the economy. Small businesses need all the help they can get, and the SBA provides important resources that make it easier for entrepreneurs not only to take the leap of faith in opening new businesses but, to have a backup parachute should they ever need it.

 

What are SBA loans?

 

According to the Wall Street Journal, “the SBA doesn’t directly fund small-business owners”; rather, the SBA acts as a safety net for those owners who otherwise wouldn’t be able or willing to risk taking out loans that they may have trouble paying back. The SBA also gives larger financial institutions more of an incentive to provide financing to small businesses that they otherwise might not feel confident funding.

 

By guaranteeing up to 85% of the loan amount, the SBA helps to create a more stable environment for both lenders and borrowers. According to Forbes, that stability has been dramatically shaken by the government shutdown; SBA loan applications went from a 50% approval rate in November 2018, to a jaw-dropping 0.3% in the following month – Yikes!

So, is the SBA shutdown?

 

With funding from the government completely halted to the SBA, the organization has ceased processing new loan applications – but fear not, there are alternative ways around, which we’ll get to in just a minute. According to the Wall Street Journal, around $2 billion in lending has been held up as a result of the government shutdown. This means that every day, around 245 small businesses are unable to get the funding they need to operate properly.

 

While applications that were submitted and approved prior to December 22, 2018 are still being processed, those borrowers who missed the December 22 cut-off are now facing financial deadlines which will be missed because of this political shutdown.




SBA loans during the government shutdown: What do business owners need to know?

 

The SBA is just one organization, so why should you care as a business owner attempting to utilize the SBA’s services?

 

Picture our economy as an airplane with all of the different parts working together to keep the huge vessel flying through the air. While a small malfunction may not seem all that important at first, the reality is that even one loose screw could result in serious consequences.

 

 

Although the SBA is only a single piece of the larger economic machine, the capital that they help make available to small businesses effectively allows owners, along with their employees, their suppliers, their vendors, and so many others, to operate at full capacity. The domino effect caused by the SBA loans government shutdown will be felt by hundreds of businesses as well as their affiliates, partners, and patrons.

Fingers crossed, the shutdown will be resolved in the near future. But the tremors following this political earthquake will continue to affect borrowers for many months, if not years, down the line. In the meantime you shouldn’t worry yourself too much – there are other solutions to your financial needs without having to rely on the SBA.

 

SBA loan tips: How can business owners cope during the government shutdown?

 

Some business owners may not be in such an urgent need of funding – but even so, the ever-increasing backlog of loan applications to the SBA will present a real obstacle even after the government shutdown ends.

 

Most small businesses are seeking an immediate solution to financial setbacks that they face. If you fit into that category, here are some options you should consider during the SBA government shutdown 2019:

 

1. Apply through an alternative channel

 

Alternative lenders have become increasingly attractive to business owners who have trouble obtaining funding from banks and other large financial institutions. Online financial technology companies, such as Become, are a particularly fitting solution because of their speediness, ease of use, and high loan approval rates. So, instead of watching and waiting for the water to boil, you can apply online right now and get funding within a matter of hours! This presents a huge advantage over the traditional route of applying for a loan through a bank, even when the government isn’t shut down!

 

You can get approved for a loan of up to $500,000 with a loan term of anywhere from 3 to 36 months, and interest rates that are tailored specifically to the overall health of your business.

 

 

2. Use a different loan type

 

If you’ve already started the process of getting a business loan from a bank or lender, that institution may be able to offer different varieties of loan options. An important point to keep in mind is that the processes at these larger institutions typically take quite a bit longer than applications submitted to online lenders. So if the clock is ticking, option #1 may still be your best bet.

 

3. Extend limit on existing credit lines

 

Chances are as a business owner you rely quite heavily on your business’s credit card. Though it may not be your ideal option, extending your line of credit can provide the cushion you need to get through this rough patch.

 

So there you have it – three perfectly viable options to get around this SBA loans government shutdown!

 

Agencies affected by government shutdown 2018 – 2019

 

So what’s open and what’s closed during these ‘dark times’?

 

Which agencies are affected by the government shutdown?

 

  • National Parks
  • Museums – only “essential personnel” remain to care for zoo animals
  • The IRS – only 12% of employees still working!
  • State Department Services – you’ll still be able to grab a passport and visa if needed, though there may be restrictions.  
  • Environmental and food inspections – still inspecting commodities such as grains, meat, and eggs



Now you have the info you need to navigate the rough waters of this government shutdown. With any luck, things will settle down soon, but in the meantime be sure to make good use of the insights provided for you here!

Disclaimer: The information contained in this article is provided for informational purposes only, should not be construed as legal advice on any subject matter and should not be relied upon as such. The author accepts no responsibility for any consequences whatsoever arising from the use of such information.