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Washington, D.C.—Today, Rep. Judy Chu (D-CA), Chairwoman of the House Small Business Subcommittee on Investigations, Oversight, and Regulations, held a hearing into the impact of the recent government shutdown on the Small Business Administration’s (SBA) flagship lending programs. Concerned that the shutdown shuttered the agency’s ability to make loans to creditworthy small businesses, the Subcommittee probed the head of SBA’s Office of Capital Access for answers on how the agency dealt with a backlog in loans. 

“The recent government shutdown was an acutely painful experience for our nation’s small businesses,” said Chairwoman Chu. “It was 35 days of missed paychecks, delayed loans, and strained budgets for too many of our federal employees, contractors, and small business owners. It is important we understand the extent of the economic injuries caused to entrepreneurs as they sought capital – many of whom rely specifically on SBA loans because they’ve had trouble securing affordable credit elsewhere.”  

During the recent 35-day partial government shutdown, the SBA was among the federal agencies that faced a lapse in appropriations. During this lapse, the agency was unable to process any outstanding or new loans. This reality was particularly hard hitting to small businesses that rely on SBA’s flagship loans such as the 7(a) lending program, which is designed to provide affordable credit to small firms that have trouble securing financing elsewhere. 

On Friday, February 22, SBA provided the Committee with an update of its lending activity since it resumed full operations on January 28. SBA stated that after four weeks, it approved over 7,900 loans for a total of $3.7 billion, and it has now returned to pre-lapse levels in all its lending categories. Specifically, SBA stated that 7,205 7(a) loans have been approved for a total of $3.17 billion, while 734 loans in the 504 program have been approved for a total of $542 million.

“Due to the funding lapse, our business lending and surety programs were closed from December 22 through January 27, a total of 20 full business lending days,” said William M. Manger, Associate Administrator Office of Capital Access at the U.S. Small Business Administration. “SBA was unable to approve loans during this period and was not able to accept new loan applications. Applications for SBA-guaranteed surety bonds were also not able to be processed by SBA. All new secondary market 7(a) loan pools were stopped and purchasing of SBA-guaranteed loans was also halted. Once Congress restored funding for SBA operations, our loan program systems were immediately operational on Monday, January 28, and normal business in the Office of Capital Access resumed. An Information Notice was published to notify all lenders that SBA was open for business. The detailed notice covered such topics as interim loans, servicing actions, report filings, as well as expedited requests.” 

During the hearing, Chairwoman Chu commended the SBA for working through the backlog of loans and emphasized the need for continued oversight, and to prevent future government shutdowns. 

“The bottom line remains that for 35 days, our country’s main avenue for responsible small business lending was shut down,” concluded Chairwoman Chu. “Though we may never fully know the exact magnitude of the shutdown, we do know that the impact on the economy was far more severe than our country’s entrepreneurs deserve. I think my colleagues on the other side would agree it should never happen again. I thank Mr. Manger and his team at SBA that got right back to work on Day 1 after the shutdown to get our entrepreneurs back on their feet.”

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