Navigating SBA 7(a) Lending Amid the Possibility of a Government Shutdown

As the specter of a potential government shutdown looms closer, the SBA lending community must prepare for the potential implications on the 7(a) Loan Program and the Secondary Market Guarantee Program. NAGGL President and CEO Tony Wilkinson has emphasized the need for lenders to be vigilant, given the heightened risk of a shutdown following sudden shifts in congressional negotiations.

While it remains unclear whether a deal will be reached to avert a shutdown, or if a shutdown occurs, how long it will last, SBA lenders need to be proactive. Below, we outline key considerations and actionable steps for 7(a) lenders to mitigate risks and maintain operational readiness during this uncertain period.

Key Facts About 7(a) Lending During a Shutdown

1. No New 7(a) Loan Approvals or Increases:
2. Impacts on the Secondary Market:
3. Communication from SBA:

Preparing for a Shutdown: Steps for Lenders

1. Complete and Submit Transactions Before Deadlines:
2. Communicate with Borrowers:
3. Prepare for Alternative Financing Solutions:
4. Monitor Updates from NAGGL and SBA:

Background: What Led to the Current Crisis?

The current risk of a shutdown arises from stalled negotiations on a Continuing Resolution (CR) to fund the government. Former President Trump has opposed the bipartisan CR proposed by Speaker Johnson, insisting on a “clean CR” that excludes additional spending beyond disaster relief. This unexpected development has left congressional leaders scrambling to renegotiate terms ahead of the December 20 deadline.

The added complexity of debt ceiling negotiations, which could come to a head in early 2025, further complicates matters. While lawmakers are working to reach a consensus, the tight timeline makes the possibility of a short-term shutdown increasingly likely.

Why Acting Now is Critical

While the future remains uncertain, lenders and borrowers alike should focus on the opportunities available today.

• Loan Processing: Current SBA operations remain functional, and loans are being processed as usual. Delaying applications could result in extended wait times or missed opportunities in the event of a shutdown.
• Interest Rates and Terms: With interest rates favorable and terms stable, this is an opportune moment for borrowers to secure financing.

Takeaways for SBA Lenders

1. Be Proactive: Complete transactions and submit required documentation immediately to avoid disruptions.
2. Stay Informed: Regularly check updates from NAGGL and SBA for the latest developments.
3. Communicate Transparently: Maintain open lines of communication with borrowers to manage expectations and explore contingency plans.

In times of uncertainty, preparation is key. By staying ahead of potential challenges, SBA lenders can minimize disruptions and continue supporting small businesses—regardless of what happens on Capitol Hill.

See the full statement from NAGGL President, Tony Wilkinson, below.

“The 7(a) industry needs to be aware that the risk for a government shutdown has significantly increased over the past 24 hours and lenders should be at least prepared for a government shutdown of some length. Congressional leaders are currently working to negotiate a deal to fund the government beyond the Friday, December 20 deadline, which gives lawmakers until midnight on Saturday morning to prevent a shutdown. Given how fluid these negotiations are, it is currently unknown when a deal could come together or if there is a shutdown, how long it could last. Since the 7(a) Loan Program and the Secondary Market Guarantee Program both rely upon the federal government remaining operational, NAGGL, as always, will remain on top of the latest coming out of Capitol Hill, and make sure that we are keeping you all apprised of how any funding deal or possible shutdown will impact your important work.”