Photo by Tim Mossholder on Unsplash
Everyone feels the effects of government shutdowns differently. Here at Apex, we have a number of our deals “on hold” at the moment because during a government shutdown, the SBA halts its core lending operations, which stops new loan approvals and delays existing ones. But just because the SBA is on hold doesn’t mean our clients should sit waiting for the government to reopen.
Exceptions or Alternatives?
We would love it if Preferred Lenders were on some kind of exception list, but they aren’t. But if a loan had already received an SBA loan number — either by the SBA before the shutdown, a lender can move forward with disbursing funds. In the meantime, the SBA itself estimates that every day the shutdown continues they are not approving up to $170M for disbursing. If you want a different frame, Kelly Loeffler, head of the SBA, has said publicly that there are 6,000 loans being held up totaling around $4B in funds. In fact, prior to the shutdown, the SBA had issued a record $45B in loans to 85,000 small businesses for fiscal 2025.
This shutdown is now officially the longest in US history, so at some point it might be worthwhile to look at some kind of bridge. Perhaps the seller could offer financing with the buyer bringing more capital to the transaction. Conventional lenders are an option for businesses that can offer equipment, inventory, and real estate as collateral, as well as buyers with additional equity in their homes or real estate investments. Using an investment account as collateral is always an option. If both buyer and seller are aligned on desire, lots of alternative solutions could work.
Keep Working
There will be a backlog to work through when the SBA is open for business again, and you will want to be ready to submit when that happens. You can only do that if you continue to work with your lender to make sure that all your paperwork is done. You should have a list from the bank of all the required documentation!
Banks can continue to evaluate applications independent of SBA approval. This means you can get everything that they need to make a decision so that they can do so and have the one outstanding thing be an SBA approval.
This means you can select a lender and go through the underwriting process with them. All the things a lender will ask for will be unrelated to the shutdown:
- Business financials analysis
- Business plan reviews
- Financial projections
- Borrower qualifications
If all goes well, you may even get conditional approvals from the credit committee of your lender, which effectively commits them to fund pending the acquisition of that sweet SBA guarantee.
Be “Shovel Ready”
If you take care of what you need to with your lender, your application can be “shovel ready” for the SBA when it reopens. At that point, once your application is reviewed and approved, closing procedures begin, which include finalizing legal documentation and setting a closing date. This is also something that a well-advised buyer can lay the groundwork for ahead of time.
Unfortunately, we are veterans when it comes to government shutdowns, so we know how to navigate this with our clients. Don’t let the shutdown stop you from starting the process of buying or selling a business. Let’s talk.