Shutdown Will Unexpectedly Impact Business Lending Long-term

By Bibby Financial Services

28 Jan 2019

Small Businesses are on Hold for Access to SBA Loans

The deadlock in Washington, D.C. may be over but its effects will have long-term impacts. Upwards of 1 million federal government employees and many small to medium-sized business owners are feeling the effects. Whole sectors of the government were out of operation from December 22 until January 28, the longest government shutdown in history. Businesses that interact with the government for approvals, regulation or other needs will experience further delays as these agencies work to catch up. Especially for small to medium-sized businesses (SMBs), this can be a significant burden with several key agencies and programs including the IRS and SBA trying to reopen and restore to normal operations. 

Suppliers and manufacturers supporting SMBs have also felt the impacts of not being able to access government funding aimed to provide relief from increased costs due to China’s tariffs including Agriculture Department loans and money from the administration’s fund to help farmers. Many of the agencies responsible for approving products were not operating either during the shutdown, creating a backlog of products to be inspected and approved for production. The IRS will begin issuing refunds or processing tax filings but there will be delays in the coming weeks. For startups, there were interruptions to employer identification numbers (EINs) being issued, which is essential for starting business operations. Even after government restoration, there will be postponements of SBA loan approvals and private companies applying for initial public stock offerings will have to wait longer for decisions until agencies can get caught up. 

The SBA makes more than 66,000 loans each year, totaling more than $30B. This is an average of 5,500 loans each month at roughly $455K per loan. With thousands of SBA loan applications backlogged, SMBs still won’t be able to immediately rely on this source of funding as it will take months to alleviate the backlog that has accumulated. After high approval rates for SBA loans in November 2018, December 2018 and January 2019 were expected to be good months for SBA lending to small businesses looking for access to capital. It’s expected there will be a lasting slowdown in business lending stretching well into 2019. 

There are millions of SMBs in the US, many whom rely on SBA loans for financing their business operations and now must look for alternative ways of funding. Those who were already engaged in the SBA process may be in the most difficult position and need alternative funding immediately to fulfill contracts that were already underway. Flexible alternative funding solutions like Factoring or Asset-Based Lending are often untapped options for many business owners in need of working capital. Bibby Financial Services (BFS) encourages you to research these options to fund your business.  

BFS has representatives throughout the US ready to learn more about your business, discuss your unique needs and quickly customize an alternative funding solution to help with your cash flow challenges. Contact us today at marketing@bibbyusa.com or 877.882.4229 to learn more.
 

 

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