We are still plugging away. Enterprise Development is not a government agency. It is a not-for-profit organization that has to operate like any small, entrepreneurial business. The company must make payroll, pay expenses and earn money. No furlough here at 910 E. Broadway. To the contrary, if you stop by you will see a flurry of activity as we prepare to provide fixed rate lending to more approved businesses and get ready for what we think will be a booming 2014.
The other question is “Does the shutdown affect you?” You bet it does. In coming blog posts, I am going to give a very detailed account about the process that the bank, a certified 504 lender and the borrower go through to get a loan. For the sake of brevity in this post, it is safe to assume it is a multi-step process that requires government action during critical steps. Since SBA employees are furloughed, no loans are currently getting approved. This not only affects loan applications now, but it also affects fundings that are scheduled for November. It is kind of like getting to the airport early and waiting for your flight, and then finding it has been delayed. This delay not only affects your travel plans, but might also cause problems with the travel plans of everyone else over the entire day.
This issue seems obvious, but there is another potentially bigger problem that most do not consider. The SBA 504 loan's fixed rate lending structure is tied to Treasury bill interest rates. Since T-bills are a traded commodity, the shutdown and looming debt crisis might cause more interest rate fluctuations and volatility. Thus, it becomes impossible for us to predict what interest rates might be when the loans are funded. And, of course, if the shutdown goes on too long, and US debt service is questioned, interest rates may start to climb. 504 loan rates then must necessarily increase, causing potential problems across the entire lending spectrum. From a small business standpoint, let’s hope our leaders find the wisdom to solve the problem in a timely and prudent manner.