Knowledge and Insights

How Federal Government Shutdowns Affect SBA Lending

Nearly all of us were following the news headlines or stories about the recent federal government shutdown and wondering when it would be over. While the duration and visibility of this one may have reached new levels, shutdowns have happened before. Whenever a federal government shutdown occurs, the U.S. Small Business Administration (SBA) partially ceases operations, significantly impacting the nation’s financial community and small businesses. The affected SBA operations include: new loan processing, existing client and loan portfolio servicing, secondary market-related functions, and technical support, among others.

According to the SBA’s Plan for Operating in the Event of a Lapse in Appropriations, processing for most SBA lending programs is put on hold as the agency’s employees are on furlough. Regardless of the loan processing method, no new loans can be approved during this time, including for transactions where the financial institution may have delegated authority. Furthermore, requests for commitment changes and increased loan amounts are treated in the same manner as new loans and cannot be processed during a shutdown. Some exclusions to this exist to provide for disaster support to small businesses.

Lenders, however, may take certain actions to continue servicing their loan portfolios and customers, particularly if they delegated authority, including those actions that may require notifying the SBA. These actions include processing loan commitments where an SBA loan number already has been assigned or for bridge loans during the government shutdown period. Others may require SBA review and further delay the credit process.

The SBA directed several agency employees to manage essential activities during the shutdown period. These publicly-named individuals are available to assist lenders with those actions deemed necessary to protect the lender’s and SBA interests, including protection of property.

Mercadien is available to your institution to help:

  • support your current independent loan review plan;
  • develop credit risk management evaluations;
  • validate the accuracy of your allowance for loan and lease losses; or
  • brainstorm to improve your credit risk management process.

Please contact me at or any of our Financial Institutions Services professionals at or 609-689-9700 to discuss.