Knowledge and Insights

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.

IMPACT ON SBA LENDING PROGRAMS

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.

ACTIONS LENDERS CAN TAKE

Lenders, however, may take certain actions to continue servicing their loan portfolios and customers, particularly if they have 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.

HOW MERCADIEN CAN HELP

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.

TAKE ACTION TODAY

Don’t let a federal government shutdown disrupt your SBA lending operations. Contact Mercadien’s Financial Institutions Services Group today to help ensure your institution is prepared and can continue to serve your customers effectively. Our team is here to provide expert assistance and strategic solutions that keep your lending programs on track.

DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.