It’s October 1 and once again there is no fiscal budget to provide the financial authorization to pay for a federal government, but this time Congress failed even to enact a continuing resolution to keep the government operating. As a result, all operations not deemed ‘essential’ were halted effective midnight last evening.
According to Bloomberg BusinessWeek’s account of the first federal government shutdown in 17 years, it means that about 800,000 government workers are being furloughed. In addition, funding is suspended for a wide array of services, including contracts that government agencies award to small business owners.
This means that loan guaranty programs for small businesses are immediately impaired as of today. The SBA, which provides tens of billions of loan guarantees to banks that finance thousands of entrepreneurs each year, is forced to furlough roughly 62 percent of its 3,500 employees as per the agency’s contingency plans for the potential government shutdown that was disclosed last week (SBA Contingency Plan) on the agency’s website.
While the loans already guaranteed by the SBA are not be affected, all review and approval of new loan backing comes to a standstill until Congress passes legislation to fund agency activities. SBA programs to foster international trade, help small firms win government contracts and assist veteran-owned businesses when operating.
SBA lenders have been in this situation previously, as have most federal agencies. It is serious but not as dire of a situation as the subsidy fights that Congress went through each year prior to 2004 over the 7(a) loan program. That program was shuttered three times in 1995 alone due to lack of funding.
And with all the cajoling going on to get an annual budget approved, Congress continues to ignore the proposed 504 Refinance extension legislation, which was cited by dozens of SBA lenders in SBFI’s SBA Lender Optimism Outlook as desperately needed to spur Main Street borrowing.
Read more at Bloomberg BusinessWeek.