As of October 1, 2025, the government shutdown went into effect. The SBA is directly affected, which means SmartBiz and all other SBA lenders are unable to complete final processing on loan applications until the government reopens. We’ll keep you updated every step of the way.
When the federal government shuts down, the effects ripple far beyond Washington. For small business owners, the consequences may be immediate and costly, especially for those seeking financing through government-backed programs.
While essential services may remain operational, much of the Small Business Administration (SBA)’s loan processing and support systems grind to a halt.
Understanding how shutdowns affect SBA programs and knowing how to prepare may help small business owners protect their plans, cash flow, and long-term growth.
What happens to SBA loan programs during a shutdown?
The SBA plays a critical role in helping small businesses access capital through its flagship programs, including the 7(a), 504, and Microloan programs. But when a government shutdown occurs, most of these services are paused.
New loans are suspendedDuring a shutdown, the SBA stops processing, approving, and disbursing new loans under its major programs, including the 7(a) and 504 loans. Even lenders with delegated authority (which normally allows them to approve loans on the SBA’s behalf) must pause new approvals.
According to the U.S. Chamber of Commerce, each day of a government shutdown could mean approximately $100 million in lost loan funding for small businesses across the country.
Delays continue even after the shutdown ends
Once the government reopens, the SBA must work through a backlog of loan applications submitted during the shutdown. This may extend approval timelines, delaying access to capital just when business owners need it most.
Disbursements and servicing may be delayed
If a loan was approved before the shutdown but hadn’t yet been disbursed, funding may be delayed until the SBA resumes normal operations. Additionally, some servicing actions that require SBA approval, like loan increases, reinstatements, or deferments, may be postponed.Are there any exceptions?
Not all SBA programs stop during a shutdown. Two key programs often remain operational:
- SBA Disaster Loans: These continue to be processed because they are funded through a different mechanism. If your business is located in a federally declared disaster area, you may still be eligible to receive support.
- SBA Microloans: Many microloan intermediaries receive funding from the SBA in advance, which allows them to continue lending even if the agency temporarily shuts down.
What if you already have a PLP number?
If your SBA loan has already received a Preferred Lender Program (PLP) number before the shutdown began, you’re in a stronger position. The PLP number indicates that your loan has been approved under the SBA's delegated authority and is essentially "locked in."
However, while this status helps preserve your approval, some administrative processes may still be delayed, including disbursements or changes requiring SBA confirmation. It’s important to stay in close contact with your lender to monitor the timeline and ensure all required documentation is ready so funding can proceed quickly once normal operations resume.
How can businesses prepare for a potential shutdown?
While a shutdown may be outside of your control, how you respond isn’t. There are several ways to help minimize disruption to your funding plans:
- Stay in close contact with your lender
Your bank or SBA lending partner may provide updates about the status of your loan and help you prepare your application. Submitting a complete application in advance allows you to hit the ground running when the SBA reopens. - Organize your financial documents
Use the downtime to prepare the documentation you’ll need for an SBA loan, including tax returns, financial statements, business plans, and personal credit reports. The more organized you are, the faster your application may move when the time comes. - Consider alternative funding options
If you need access to capital during a shutdown, consider non-SBA financing options. Traditional bank term loans, lines of credit, or short-term online loans may offer quicker approval timelines and can help bridge the gap until SBA funding resumes. - Review your cash flow strategy
A funding delay often puts pressure on payroll, inventory purchasing, or operational expansion. If your business is at risk, talk to your banker or accountant about managing cash flow conservatively until the shutdown ends.
Resources for small business owners during a government shutdown
- Local SBDCs (Small Business Development Centers): Many SBDCs continue to operate during shutdowns and can offer free advising on funding, strategy, and documentation.
- U.S. Chamber of Commerce Small Business Guide: Offers updates and tools for businesses navigating federal funding and regulatory changes.
A frustrating and uncertain time
A government shutdown can be a frustrating and uncertain time for small business owners, especially those relying on SBA funding to launch or grow their operations. While some parts of the SBA may pause, smart preparation can help reduce the impact.
Communicate with your lender. Explore your options. And keep your documentation ready. With the right plan in place, you’ll be positioned to act quickly once funding becomes available again.
