How Will The Government Shutdown Affect SBA Loans?
There will be stories about all of the things that the SBA cannot do during the shutdown, but the impact on the actual lending programs are minimal. Here is why:
First - please note, this is nothing new. There have been 17 previous government shutdowns in my career (3 in 1995 alone) and the SBA lending community is very well adapted at handling them. It is even easier now, since 2004 with the budgetary changes made at that time.
Second - for our customers, we will operate with a business as usual attitude. There will be stories about all of the things that the SBA cannot do during the shutdown. The published list of things the SBA cannot do during the shutdown is long and appears ominous. It is true they have furloughed some 3,500 SBA employees, but the impact on the actual lending programs are minimal. Here is why:
- The lenders we use are primarily PLP (Preferred Lender Program) lenders which means they make all credit decisions, process all underwriting and perform all closing functions in house.
- All loans that are already approved and have their PLP number assigned will close as scheduled. The funding to cover those loans is already allocated and available.
- Loans that are "in process" will continue through the process, will be approved as normal, and it is quite probable that the shutdown will be over before these loans need to be assigned a number, so their closing process will not be affected. (If the shutdown becomes "prolonged" the closing of these loans will be delayed until the SBA is able again to assign PLP numbers, but that is unlikely based on all we are hearing at this time)
- New loans that come in will be processed exactly as normal and it is probable they will notice NO delay in closing. By the time they are ready for closing, the system should be active once again.
There are a few things we will not be able to do during this time however.
- If there is a 912 issue (criminal background issue) - we will not be able to process those for clearance until the shutdown is over. We can still process the application for credit approval, but we can not obtain the clearance they will need for closing until the SBA returns to work.
- If there are any questions related to the implementation of the new SOP (Standard Operating Procedures - i.e. - the Bible by which we operate in the SBA world) we can not get those questions answered until the shutdown is over. The new SOP does not take effect until January 2014, so this limitation should not impact current applications.
- Any approved loan scheduled for closing that the lender did not for some reason obtain the PLP number for yet, WILL be able to close, but the closing will need to be delayed until the number can be assigned.
The bottom line is - our customers should not experience any significant inconvenience or delay due to the government shutdown. There may be that rare exception where a PLP number was not yet obtained and we need to wait for it, but even then, the closing WILL occur as soon as the shutdown is over. We are moving "full steam ahead" with business as usual.