Small-Business Loans Are Being Held Up By the Government Shutdown. Here's What to Do

The federal government shutdown has claimed many victims--most notably the scores of furloughed employees--but its impact is being felt in other ways, too.

Since the end of December, thousands of small and midsize businesses have not been able to get their loans processed by the Small Business Administration (SBA).

The Washington Post reports that more than 300 SBA loans a day are not being processed. That's leaving many entrepreneurs unable to get the money they need to start or grow their businesses.

Cases are popping up in news stories across the nation. For example, the Post reported on a small-business owner in North Carolina who is awaiting a $550,000 loan to buy an acre of commercial property to be used in expanding his business. Without the money to close the deal, he faces losing the money that went in recent months for appraisals, paperwork, fees, and environmental assessments.

The Post article notes that grace periods are being extended in some cases nationwide, but that will only last so long.

The waiting is the hardest part

Entrepreneurs tied up by the shutdown have a few options.

The best option--if you can manage it--is to do nothing. If at all possible, hold off on obtaining your funding. President Trump and other politicians may be blustering that the shutdown could last for months or even years, but the pressure to end the impasse is only going to grow as the myriad of government services not available hinders more and more people.

I'm no Nostradamus, but the impasse still seems more likely to end sooner than later. Whether by executive order or Senate compromise, the government cannot keep American government workers off the job too much longer. The country will not stand for it.

Yes, you might need the money and you could miss some opportunities, but tightening the corporate belt and standing pat will leave you best positioned for the end of the shutdown.

Other possibilities

Of course, some of you can't wait. Whether you're in desperate financial straits, you have cash tied up in a project that can't be delayed, or there's some other pressing scenario, you might just need money--now.

While I'm a proponent of using SBA-backed loans as often as possible--the combination of low rates and generous repayment terms is hard to beat--there are other loans out there.

Your next-best bet is probably a non-SBA-backed loan from a bank. You may well be able to get funding, although the lenders you work with may not be as experienced working with small businesses. And you'll probably pay more for the money while facing stricter repayment terms.

Only you can determine if it's truly a small price to pay if you're in a jam. Tread lightly.

Beyond that, the options get more tenuous.

So-called online lenders promise a fast turnaround and often deliver--at a price. That price includes often-exorbitant interest rates and potentially onerous repayment terms.

Again, buyer beware, but if you have the cash flow to handle the loan, it might work for you.

And then there's the possibility of selling off some of your company's equity in exchange for a cash infusion.

That option often provides short-term relief in exchange for long-term pain. The biggest risk with an equity share is that you and your new partners won't see eye to eye. Sometimes there's friction. Other times, the original entrepreneur gets forced out.Tread carefully, especially if your company vision is of paramount importance.