Shutdown freezes federal biz loans, creates backlog
If you recently applied for a business loan through the U.S. Small Business Administration, get ready to wait in line because of a backlog created by the government shutdown.
As of Oct. 1, all pending applications for the SBA's 7(a) and 504 loans were effectively frozen, said Michael Austin, senior vice president and commercial relationship manager at Fulton Bank in Virginia Beach.
"If the shutdown goes past another week, it will really start impacting our ability to provide SBA lending in a timely manner," he said in an Oct. 4 phone interview. "Any loan that was not approved prior to Sept. 30 has not been funded and has been put into an approval queue."
The 7(a) program provides up to $5 million for eligible businesses for working capital, equipment, real estate, construction and other purposes. Last year, the average loan amount was $337,730. Interest rates range from 2.25 percent to 2.75 percent, depending on the terms.
The 504 program provides financing for major fixed assets such as equipment or real estate.
Even loans that received SBA approval might still be stalled, as lenders require official proof of a borrower's income from the Internal Revenue Service.
"We have several that are kind of in this limbo state right now," Austin said.
There are alternatives, however. The Virginia Small Business Financing Authority offers several lending programs for small businesses, including:
* The Economic Development Loan Fund finances fixed assets such as land, buildings and equipment. Borrowers can receive up to $500,000 or $1 million depending on eligibility.
* The Loan Guaranty Program provides lines of credit for inventory and accounts receivable; loans for permanent working capital or fixed asset purchases; and restructured debt. The maximum guarantee is $750,000 or 75 percent of the loan amount.
- Teresa Talerico