Now that both chambers of Congress have voted to add nearly $5 billion in additional funding authority, the Small Business Administration's flagship 7(a) lending program is likely to resume operating by midweek.
Problems solved? Not exactly.
Small-business lenders and experts are beginning to debate whether the weeklong shutdown will underscore the program's bipartisan support — or give its critics more ammunition to argue that it is too vulnerable to politics.
Some nonbank lenders, who rely less on SBA loan guarantees than many traditional community and large banks, argue the crisis may make alternative sources of credit more appealing.
"Borrowers look to SBA with a degree of confidence," Hunter Stunzi, co-founder of Charleston, S.C.-based SnapCap, an online commercial lender, said in an interview Monday. "You really have to do a lot of work up front just to submit an application. So to endure months of back-and-forth only to find out SBA doesn't have the money to fund the loan is bound to be disappointing. It's a boon for the private marketplace. "
Three-year-old SnapCap's origination volume will approach $200 million in 2015 in no small part because of borrower discontent with the red tape involved in obtaining conventional bank and SBA loans.
In another sign of the nonbank commercial lending industry's growth, two online lenders scored notable successes with initial public offerings in December. On Deck Capital raised $200 million while LendingClub raised $1 billion from its stock sale.
"Demand is increasing significantly and it shows no signs of abating," Stunzi said.
Others beg to differ.
Bob Coleman, author of the Coleman Report, a trade newsletter for small-business bankers, sees things in an optimistic light. A brief 7(a) shutdown will end up as little more than an annoyance for banks and small-business borrowers, he said in an interview Monday.
The Senate's voice vote last week to increase 7(a) funding "tells me SBA is becoming a bipartisan product," Coleman said before the House approved the measure Monday, also on a voice vote.
"All the statistics demonstrate that in terms of a public-private partnership, 7(a) is truly remarkable. It does what it is supposed to do, so I think the fallout will be positive."
In terms of numbers, the shutdown — which began Thursday — has injected an element of disruption into what has been undoubtedly the most successful year in 7(a)'s 62-year history. The $18.75 billion Congress authorized for fiscal year 2015 was the program's largest-ever grant of funding authority and it was exhausted with more than two months remaining in fiscal 2015.
The Senate moved Thursday to raise 7(a) funding authority to $23.5 billion, and the House measured adopted Monday was identical.
"Congress is showing a willingness to keep bumping up that number," Coleman said.
The Obama administration has expressed its support for additional 7(a) funding authority.
Under 7(a), the SBA provides guarantees of up to 85% on small-business commercial loans. The existence of a government guarantee means banks don't have to hold as much capital for 7(a) loans. There is also a growing secondary market for them. As a result, gross loan guarantees jumped from $15.1 billion in fiscal year 2012 to $19.2 billion last year and appears poised to break the $20 billion threshold in fiscal 2015. (The federal government's fiscal year runs from Oct. 1 to Sept. 30.)
The fly in the 7(a) ointment has been periodic shutdowns. Congress averted a program disruption last September with an eleventh-hour funding increase. In October 2013, though, the program shut down for more than a week while Congress and the Obama administration debated the budget. SBA was also forced to shut the program down temporarily in 2004.
This year 7(a) has been "a victim of its own success," according to James Ballentine, the American Bankers Association's executive vice president for congressional relations and public affairs. In a letter urging support for H.R. 2499, the House bill providing for increased 7(a) funding authority, Ballentine called the program "a critical lending tool for traditional banks to help meet the credit needs of small businesses."
But David Goldin, the chief executive of the alternative lender Capify, said the latest crisis in Washington may help draw new customers to his business, which does not use the SBA 7(a) program.
"It's a very tedious process and now it's getting another level of uncertainty," he said Monday.