What Happens to SBA Loans During a Government Shutdown?

When the federal government shuts down, many small business owners understandably panic—especially those pursuing SBA-backed financing. The truth is: yes, SBA loan processing is impacted during a shutdown, but there are steps you can take now to mitigate delays and keep your funding strategy moving forward.

How SBA Lending Is Affected in a Government Shutdown

1. New SBA 7(a) & 504 Applications Are Paused

During a shutdown, the Small Business Administration temporarily suspends processing of new 7(a) and 504 loan applications. Lenders cannot submit new applications via E-Tran or CAFS (SBA’s systems) until appropriations are restored.

2. Routine Approvals & Closings Stall

Even deals that have conditional approval may be delayed. SBA delegated lenders (PLP or Express) often can't finalize loans until SBA resumes operations.

3. Existing SBA Loans Continue as Normal

If you already have an SBA-backed loan, payments are still due. Loan servicing, such as collection, routine oversight, or modification requests (if SBA allows), may continue in limited capacity.

4. Microloans & Disaster Loans May Be Less Affected

Some SBA-backed microloan programs are run by intermediary lenders who already have funding, so those may continue operating. Disaster loans may still be processed, though with delays, since their program often has separate funding provisions.

5. Backlogs Typically Follow Shutdowns

Historically, post-shutdown periods see a surge in SBA submissions, which can stretch out approval timelines even after the shutdown ends.

Why This Matters for Business Owners

• Lost momentum: A deal you expected to close may stall at the final hurdle.

• Cash flow stress: If you timed capital for a project or equipment purchase around your SBA approval, delays can put pressure on your budget.

• Uncertainty: You don’t know exactly when the SBA will resume full operations, making planning harder.

  
  

Ways to Bridge the Divide During a Shutdown

1. Prepare Your Application in Advance

Don’t wait until the shutdown ends. Work with your lender now to get your paperwork in order—financials, projections, collateral schedules, business structure—and keep everything ready so the moment SBA reopens, your deal is ready for submission.

2. Explore Non-SBA Alternatives

While SBA support is paused, consider non-SBA options: working capital loans, equipment financing, lines of credit, or bridge loans. These can keep your business moving until SBA-backed funds become available again.

3. Use Delegated or “Pre-Approved” Lenders

If a lender has delegated authority (PLP or Express), they may already be able to move certain deals internally and await SBA sign-off later. These lenders often have more flexibility.

4. Negotiate Conditional Purchase Terms

If you’re buying equipment or signing a contract contingent on funding, ask the vendor to allow flexibility—e.g., deposit only, delivery after funding, or deferred payments until funding clears.

5. Communicate With Your Lender

Stay in contact with your funding partner or lender. They are dealing with the same constraints. Good lenders will track your file, update you on when SBA systems resume, and help you manage expectations.

Final Thoughts

A government shutdown can freeze SBA-backed deals, but it doesn’t have to freeze your business momentum. By preparing early, exploring interim financing, and working closely with a lending partner, you can bridge the gap until SBA operations resume.

If your SBA deal is at risk of delay, or you need alternate funding during the shutdown, let’s talk.

At Brilliance Funding, we help business owners navigate these uncertain periods and keep capital flowing when it matters most.

   About the Author

   Jared Holmes is the founder of Brilliance Funding Partners, where he helps business owners navigate the commercial lending landscape with confidence. With 10 years of hands-on experience in SBA lending, equipment financing, and working capital solutions, Jared focuses on asking the right questions and delivering financing strategies that make sense for each business. Connect with Jared for a personalized conversation about your options.