Today marks 25 days since the partial shutdown of the United States government. A large number of federal agencies are grappling with being understaffed or having their operations halted. The Small Business Administration (SBA) is one of the agencies whose operations are no longer active. On a normal basis the SBA distributes about 200 business loans as well as 120 commercial property loans daily. This translates to about $200 million worth of SBA loans being disbursed to the small and mid-sized businesses. On 22nd December 2018, which was the first day of the shutdown the SBA had to stop its business as well as commercial properties loan programs. The only businesses receiving the SBA loans are only the ones affected by intense natural disasters. All the others will have to wait for the shutdown to end.
A high number of small businesses in the US are eagerly waiting for the SBA funds. This number is on the high side due to the fact that just one month before the shutdown began the approval rate for the loans had surpassed the 50% mark. The SBA loans are in high demand due to their long terms as well as reasonable interest rates. These loans are much easier to qualify for compared to the conventional banks. The SBA will guarantee 85% of the loans for up to $150,000 and 75% over this amount but not exceeding $500,000. This makes it possible for an applicant to be approved for a loan even without readily-available capital or collateral. Most small businesses use the SBA loans to make growth plans like adding property. Any slight delay in the disbursement of these funds will see business persons lose the opportunities of buying specific properties.
According to a story on The Washington Post, most business men who had been approved for the SBA loans before the shutdown are facing huge frustrations. Location is very important for a business and sadly these businessmen cannot complete their sale agreements due to lack of funds. This will see small businesses lose huge opportunities to big businesses that will be in a position to pay in cash at a short moment’s notice. This will expose the small business owners to huge losses as they will not be able to recover the amounts they have spent on environmental assessments, appraisals and any other fees incurred.
Effects of the Continued Existence of the Shutdown
JPMorgan estimates that the US is losing over $1.5 billion on a weekly basis. The US economy, which stands at $20 trillion has managed to remain unaffected by the shutdown so far. However, economists are warning that if the shutdown persists into the month of February, the private sector will suffer drastically. The situation is dire as not all borrowers will receive their funds immediately once the SBA reopens. Experts claim that the disruption to the SBA takes weeks to get out from.
Other Options Available
Despite the fact that SBA loans are advantageous, they are not the only way that smaller businesses can get funding without the need for collateral. Small businesses in need of urgent funding should consider other companies that do business financing like the United Capital Source. United Capital Source distributes its money within 24 – 48 hours with less paperwork involved. United Capital Source does not take advantage of tragedies such as the current government shutdown to arm twist desperate borrowers to get into unjust agreements. The company understands that every minute counts for small businesses and therefore prioritizes helping them remain on course with their monthly bills as well as their growth-related ventures. This is usually done irregardless of the prevailing economic situation affecting the conventional financing institutions.