What happens to my SBA loan application or payments during a government shutdown?

The government shut down on Oct. 1, when Congress failed to agree on funding. The Small Business Administration has halted its main loan program, and that means nobody is getting approval on new loans. Even if your paperwork is already in, it could be delayed by this.

David Bybee, a senior VP at First Internet Bank, who leads government-guaranteed lending there, talked to NerdWallet about the shutdown. If you rely on SBA loans, it’s like waiting in line at the DMV, but worse — there’s money at stake, and every day you have to wait is a loss.

SBA’s Main Lending Programs

SBA’s main lending programs — the 7(a) and CDC/504 — are on ice. They’re not taking new loans. No loan applications submitted will be processed until this ends, and no one will get approval.

Lenders can’t make new loans, even if they’re members of the Preferred Lenders Program, which normally lets lenders make loans without the SBA looking them over. If a bank participates in the SBA’s “Express” program, the bank can approve some loans without sending the paperwork to the SBA for review. But not during the shutdown.

There’s just one kind of loan that’s an exception to this. If you had already been approved before the shutdown, and had a loan number from the SBA or from the delegated lender, the lender can still give you the money. But unless you already have a loan number, you’re out of luck.

Lenders are continuing to service existing loans, and they’ll answer questions from borrowers that have existing loans. They can also help you prepare an application you can submit once the SBA reopens, if you want to get a head start.

How long this will last is anyone’s guess. But even when the government reopens, don’t expect an instant approval.

According to Brennan Quenneville of Grasshopper Bank, who runs its SBA lending division, after past shutdowns, the SBA was slower than usual in approving loans, because of the backlog of loan applications.

Business as Usual

SBA microloans are business as usual. They’re handled by intermediary lenders who receive funding up front from the SBA. In other words, money’s flowing.

Unlike its main lending program, the SBA’s disaster loan program continues. It issues and services disaster loans, but limited staff means that processing and help will take longer than usual.

Payments on your loans go on as always. If you’ve got a 7(a), 504, or microloan, your payments are to your lender. Make them as usual, and contact them if you want help paying them. If you’ve got a disaster loan, your payments are due to the SBA, either through their MySBA Loan Portal, or over the phone.

The agency will only accept electronic payments starting October 1, 2025. If you send a paper check, they’re going to send it right back to you.

The SBA has put out a document listing which of its programs will go on during a shutdown and which will stop. Here’s what it comes down to:

Partners the SBA works with are keeping on with business, offering training and counseling:

• Small Business Development Centers
• Women’s Business Centers
• SCORE
• Veteran Business Outreach Centers

If you’re in the SBIR or STTR programs, those agencies can still award grants.

Most contracting programs pause. Applications won’t get processed, and there’s no help available. These programs are suspended:

• 8(a) Business Development
• Women-Owned Small Business Contracting
• Service-Disabled Veteran-Owned Contracting

An exception is the HUBZone program. It’s accepting applications and working on them.

• Talk to your lender. Your application is in limbo, but they can give you ideas on what to expect and what to do next. They can’t move you through underwriting for now.
• A plus side to this delay is that the SBA needs a lot of paperwork from you, so you can use the pause to start getting it together. So getting ready now means you’ll be able to answer any requests for paperwork from your lender sooner. You may not have control over how fast the SBA opens again, but you do have control over how fast you react when it does.
• If you miss a payment or know you can’t make the next one, talk to your lender as soon as possible.

Other Business Loan Options

Although SBA loans are very popular among small businesses, there are other business loan options you may want to consider.

The lowest rates and most favorable repayment terms generally come from banks, but qualifying for one can be hard. They typically require you to have been in business at least 2 years, have excellent credit, and bring in solid annual revenue.

A bank loan may suit you if:

• You have strong qualifications.
• You already bank with this institution.
• You want the lowest possible rate.
• You can wait a week to a month or more for funds.

Online lenders let you apply from anywhere, and they’re usually quicker to qualify, faster to fund and more flexible than banks or the SBA. And some may approve and fund your application the same day you apply. The catch is that they usually charge higher interest rates, and the term of the loan can be shorter.

An online lender may suit you if:

• You need money fast.
• You’re a startup or have bad credit.
• You don’t want to visit a bank branch.
• You have little or no collateral.

Nonprofit and community development lenders serve the middle ground between banks and online lenders. They’re flexible and often work with underserved borrowers. You can often find competitive rates and terms, but the application and funding processes can be fairly slow.

A nonprofit or community development lender may suit you if:

• You’re a woman-, veteran- or minority-owned business.
• You’re in a low-income area.
• You can’t qualify at a bank but want better terms.
• You can wait for funding.
• You would benefit from training, coaching or other educational resources.