The Devastating Impacts of The Government Shutdown on Small Businesses Are Sequential
Small business owners and start-ups the engine of the U.S. economy are taking a hit.
I am disappointed that journalists and news commentators have not covered the immediate and irreparable damages faced by small businesses when the SBA is not in operation and government guaranteed loans are not available to lenders..
Most small businesses rely on SBA guaranteed loans for the purchase of inventory, repayment of existing maturing debt, the purchase of equipment and real estate, and working capital. The immediate impact on a business that is not adequately funded is loss of revenue.
The possible sequential losses that may result are:
Purchase Orders not Completed
Penalties and Late Fees Incurred
Alternative Interim Financing at High Interest Rates
There are many local businesses throughout the nation that had planned on closing loans over the past 20 days. These loans were approved by lenders, subject to SBA loan guarantees under the 7A and 504 programs.
Without the SBA guarantees the loans will not close and the needed funds are not available.
The proceeds of these loans are usually allocated for business operations and expansion; to purchase inventory, meet payroll, hire more employees, fund pending contracts with third parties, and in some cases, repay existing indebtedness that is maturing.
Each day that passes there are more and more small businesses that have loans in process with preferred SBA lenders. The lenders are ready to close, but the loans require an E Tran number from the SBA under the appropriate SBA program.
No E Tran means no loan closing and no available funding for business operations and/or expansion.
The impact of the shutdown on Main Street is being ignored. An extended government shutdown will result in an economic tsunami.