The recent federal government shutdown was the longest in our nation’s history. Although it impacted only a quarter of government operations, it affected roughly 800,000 federal workers and is projected to cost the U.S. economy an estimated $3 billion.

Some impacts were less broadly felt but were just as onerous. The Small Business Administration (SBA) was unable to process and approve applications for its signature loan guarantee programs, resulting in delayed closings and fewer funds available for cash-strapped businesses.

Fortunately, this latest shutdown ended on January 25. However, with three federal government closures in less than a year and given the current stalemate in our nation’s capital, it’s a safe bet there will be another occurrence soon.

Lenders have several proven methods at their disposal to minimize the negative impacts of SBA approval delays due to a government shutdown or periods of high application volumes. These include:

• Apply for Preferred Lender status: Under the SBA’s 7(a) Standard and Small Loan programs, loans up to $150,000 can qualify for guarantees up to 85 percent, and amounts up to $5 million may be eligible for guarantees up to 75 percent. The downside is that the SBA makes all eligibility and credit decisions. According to the agency, normal processing times are roughly 5-10 business days. However, during the recent shutdown, the approval pipeline was frozen completely.

To reduce turnaround times, a qualified institution may apply for Preferred Lender status through the SBA’s Preferred Lending Program (PLP), allowing it to make both eligibility and credit approval decisions without SBA review.

• Take the Express: For certain types of loans in amounts up to $350,000, the 7(a) Express program provides a 50 percent loan guarantee and offers expedited processing. For these loans, the lender makes the credit decision. For small loans with lower risk, the Express program is a great way to get money into your eligible borrower’s hands quickly and effectively.
• Go outside: During the recent shutdown, we received calls from clients trying to close their SBA-guaranteed deals. Their borrowers couldn’t wait for the SBA to be back in business, but the lenders wanted to ensure these loans were fully compliant. This is where an experienced outside consultant can help. For instance, ORMS offers an SBA environmental pre-screening service. We review our clients’ credit packages, verify their SBA checklists for compliance, identify missed items, and make recommendations for adjustments.

After evaluating thousands of SBA 504 and 7(a) packages over the years, we also began offering a similar service for PLP 7(a) lenders. We review these packages to ensure they are fully compliant with all environmental requirements and the SBA’s standard operating procedures (SOP).

As mentioned above, we also assist lenders and Certified Development Companies (CDCs) with their 504 loan packages. The 504 Loan Program provides approved small businesses with long-term, fixed-rate financing for acquiring fixed assets for expansion or modernization. The SBA processes all 504 loans through its Sacramento, CA processing center. By utilizing an outsourced expert resource like ORMS, lenders can save time, resources, and a lot of aggravation.

Whereas ORMS focuses primarily on helping lenders mitigate property valuation and environmental risks that may be present in an SBA application, we partner with some excellent lender service providers (LSPs) across the country that can help your institution evaluate, underwrite, and prepare the SBA credit package for approval.

SBA guarantees represent a valuable small business funding tool for both borrowers and lenders. Prepare now for the next shutdown and help keep our country’s small businesses humming along!