On October 1, 2025, the U.S. federal government entered a funding lapse, commonly referred to as a shutdown, after Congress failed to pass the appropriations bills. While essential services remain operational, many federal programs are paused or slowed during a shutdown. Among those affected are government-guaranteed lending programs, such as the SBA and USDA.
Here’s what to know, what’s still possible, and how long this could impact small business lending.
1. SBA & USDA Approvals Needed to Be Secured Before Midnight
To move forward with a loan durning shutdown, lenders must have SBA loan guarantees in hand (i.e. formally approved by SBA). Once the funding gap starts, new approvals stop immediately.
2. Closing Already-Approved Loans Can Continue Until Capacity Runs Out
If a loan already has a valid guarantee, lenders can still proceed with closing it, even during the shutdown. However, the number of pre-approved guarantees remaining limits the runway.
3. No New Guarantees During the Shutdown
Once the shutdown begins, the SBA stops approving new guarantees, including no underwriting and no new assignments of guarantee numbers, even for lenders with delegated authority. This means fresh loan applications cannot move forward until the government reopens.
4. Duration Matters: Impact Grows Over Time
If the shutdown lasts days or weeks, the number of new closings will decline as approved guarantees are exhausted. Eventually, lenders may run out of guaranteed loans to fund. That means more small businesses could be delayed or denied access to capital.
5. Ripple Effect on Small Businesses & the Economy
Not having new approvals could force many companies with pending deals to pause growth, expansion, or hiring. The longer the shutdown continues, the more damage it does, not just to individual firms, but to economic confidence and momentum.
6. Why Shutdowns Typically Don’t Last Long
Historically, shutdowns end when the pressure builds on both sides. Lending, markets, and small business owners start feeling the pinch, which creates urgency for a resolution.
What Borrowers & Lenders Should Do Now
- SBA & USDA guarantees needed to be locked in before the shutdown starts.
- Move quickly to finalize closings on approved loans.
- Prepare documentation and eligibility so new applications are ready to go when the shutdown ends.
- Stay in close contact with your lender to understand the current status of your transaction.
At Phoenix, we’re monitoring developments closely and working alongside borrowers to minimize disruption. While new SBA approvals are paused during the shutdown, we are still actively taking applications and preparing deals now so they can move forward quickly the moment the government reopens.
We’re here to help you navigate this period, reduce delays, and be ready to act the instant the runway clears.
Author’s Note: This information is based on the SBA rules, recent reporting, and past shutdown behavior. As always, rules may shift based on how agencies handle the lapse and which functions are deemed “essential.”