Government Shutdown Threatens Shutdown Of Small Business Loans

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The government shutdown that took effect midnight last night will have some dramatic effects on small business owners that could leave them scrambling for alternative sources of financing. The shutdown will effectively turn off the budget of all government organizations and programs considered to be non-essential to the safety and continued operation of the United States. Among the bodies considered to be “non-essential” are the SBA, the Small Business Authority that backs small business loans with government money. This agency provides guarantees for business loans in order to increase the ease with which small business owners are able to procure capital. Due to the SBA shutdown, the many small business owners that pinned their hopes on their applications will find themselves once more looking for ways to secure the financing that many of them need in order to continue operating the businesses that they’ve worked hard to build. An increased reliance on alternative sources of funding has marked the post-recession financing landscape for small businesses as banks increased requirements for small business loans. The lack of government backed loans now means that even more business owners will be shut out from receiving financing from banks, as the SBA greatly expands the range of business owners who can qualify for traditional loans by securing the loan with government assets.

Small business owners are the job growth engines of the country. Without access to credit beyond their immediate cash flows, their ability to finance growth, including new hires, is severely compromised. Failure to compromise on the part of elected officials now means that small business owners have lost one more option for financing their businesses, at least for the time being.

Photo Credit to Johrling on Flickr

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