Elephant in the Room: The thing nobody wants to talk about. So let’s talk about it. A huge elephant, taking up wall-to-wall space and sucking up all the air, The U.S. government shutdown. At JRB, our emails are flooded with questions. Everybody wants to know how long this will last. Nobody knows.* We haven’t got inside knowledge. Like you, all we know is what we get from NADCO and NAGGL.
What do to about major shutdown-caused issues: Submitting new loans for approval and submitting closing packages to District Counsel. SBA was able to accommodate the January deadline for submitting closing packages to District Counsel. It’s uncertain whether there will be a similar accommodation for the February deadline if the shutdown continues. It would be reasonable to expect it. But if it doesn’t happen, review your closing escrow dates and the maturity dates of interim loans.
As the deadline nears, it might be prudent to manage the process by suggesting that closing escrow dates and interim loan maturities be extended The next closing package deadline is still nearly a month away and hopefully shutdown issues will be resolved in time. But it’s always best to resort to that old motto “Be Prepared.”
In previous shutdowns, lenders were able to submit new loan requests into a queue. This shutdown has no queue. So when the shutdown is over, SBA will be deluged with a backlog of loans built up since before Christmas. How the agency will handle this is unknown, Even though SBA might expedite the processing, be prepared for delays in approval.
Then there are the loans you are working on now, loans you plan to submit days or weeks after the shutdown is over. It’s possible that SBA might still be working through the backlog of loans when you finally submit. Again, delays are possible.
Taming the elephant. Make sure your financial information is as fresh as possible. Yes, a business financial statement is current if it’s dated within 120 days. Yet to avoid potential screen outs, be pro-active, and request borrowers to submit statements current to within 60 or even 30 days. Borrowers’ internal accounting systems can produce financial statements current to within the shorter time frames. And the Agings of Accounts Payable and Receivable are much easier to produce for a current statement than one 90+ days old.
We all know it’s a really big elephant. The situation is serious, so I’m reluctant to use my usual humorous approach to an enormous animal on the loose: We can’t make this elephant bow down, we can’t ride it and we can’t feed it peanuts. But we can handle it and be ready for all contingencies as it continues to come our way.
As always, keep your questions coming.
Richard Jeffrey
Associate, CDC/504 Programs
*As of this writing the U.S. government remained partially shut down.