Ongoing Shut Down Affects $200 Million in SBA Loans Per Day
It’s official: the current federal government shutdown now ranks as the longest in history, topping the previous record of 21 days (which occurred during the Clinton administration). So far the shutdown has resulted in furloughs for many “non-essential” federal employees and work without pay for others. As we previously reported, among the agencies affected by the shut down is the Small Business Administration. Now Inc. has run the numbers to determine just how much small business loan money is currently being held up in the on-going saga.
With all but the disaster loan department of the SBA shut down, the agency is currently unable to process applications for its popular 7(a) or 504 loans. Moreover, with the shut down still in progress, the backlog of these applications continues to grow. According to Inc. the SBA typically processes about 200 7(a) loans along with 120 “504” loans each day. They estimate that the total of these loans comes to about $200 million per day. Not including weekends or the winter holidays, that would mean that roughly $2.4 billion in working capital and commercial property loans have been held up since the current shutdown began on December 22nd, 2018.
One small piece of good news for entrepreneurs with outstanding SBA loan applications is that reports indicate SBA head Linda McMahon plans to expedite loans once the federal government reopens for business. That said it’s still unclear exactly when that might be. Previously President Trump stated that the shutdown could continue for months or years if he doesn’t receive the funding he’s requesting to build a wall along the U.S./Mexico border. Notably receiving congressional approval for such funding proved a tough sell to a Republican-controlled Congress and now seems like a complete non-starter since the Democrats took control of the House of Representatives on January 3rd. Yet, most recently, sources told CNN that the President is “not going to budge even one inch” on the matter.
As the longest federal government shutdown in history continues, small business owners who had previously applied for SBA loans may need to start considering other options. It should also be noted that, despite McMahon’s promise to expedite loans when the shutdown ends, that doesn’t mean that the backlog will suddenly be caught up overnight. While this is a certainly a trying time for entrepreneurs in need of working capital, there is a small silver lining in the fact that there are now many alternative funding options available, including peer to peer loans and other FinTech offerings. Unfortunately using these lenders may mean that small business owners have to pay more for their loans, but hopefully such solutions can help them ride out the rest of the shutdown and the SBA’s closure.