Laws & Legislation


10 02 2013

10 02 2013

Government Shutdown Halts Federal Lending

On Tuesday, Oct. 1, federal government employees cleared their desks for indefinite work leave.

The failure of Congress to pass a spending bill Monday night prompted the closure of many federal operations. They will remain closed until a new budget is agreed upon. For the first time in 17 years, programs such as the Department of Housing and Urban Development, the National Park Service and the Environmental Protection Agency experienced a partial or total shutdown. Until an agreement is met, about 800,000 federal employees will be on unpaid vacation.

While this concerns public agencies more so than it does private small businesses, the effects are far-reaching, as government lenders are among those on leave.

Federal lending halts

As a consequence of the shutdown, all non-disaster federal business loans will cease to be issued, the Washington Post reported. Tony Wilkinson, president and chief executive of the National Association of Government Guaranteed Lenders, says lenders were scrambling prior to the deadline. “We could read the tea leaves and see we were heading this way, so lenders have been working overtime to get the applications done,” he explained.

But after Monday, Sept. 30, he said, “that process will stop, and anything that comes in after that will simply go into a queue until federal funding becomes available again.” The only federal financing that will remain open is the Disaster Loan Program.

Furthermore, as federal agencies freeze up, so do the companies they contract. Small businesses that rely on government contracts could have their work put on hold.

Officials are unsure how long the shutdown will continue, but taking history into account, it could be a long time. The last government shutdown, which began on Dec. 15, 1995, persisted for 21 days.

Many businesses can’t wait that long. Staci Redmon, president of a small business in Virginia, relies on federal contracts to stay in business, according to the online NBC-affiliated news source Grio. If the shutdown continues, she will have to make layoffs. “Within 10 days [we] will have to make some serious decisions,” she said. “I cannot afford the overhead.”

But for concerned small businesses owners, options are available. Those who were hoping to get a loan prior to the shutdown can consult an alternative lender. Getting a small business loan from National Funding will be possible throughout the extent of the shutdown. Small businesses worried about their operating costs in the ensuing weeks can explore National Funding’s many financing options.


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