SBA Loan Freeze During the 2025 Government Shutdown: What Business Sellers & Buyers Must Know

If you are an owner preparing to sell your business — or a buyer actively looking at acquiring one — the current federal government shutdown is more than a distant headline. It is directly affecting deal execution. As someone who has guided hundreds of business owners through exits, I want to walk you through what’s happening, why it matters, and, most importantly, what you can do about it.

1. What’s Happening with the SBA

• On October 1, 2025, the federal government entered a funding lapse, triggering a shutdown of many federal agencies. Representative Shontel Brown+2Congressman Greg Stanton+2

• The Small Business Administration (SBA) recently reported it guaranteed a record ~$45 billion in loans during FY 2025 and issued about 84,400 guarantees. Small Business Administration+1

• Due to the shutdown, the SBA’s lending-guarantee operations for core programs (such as 7(a) and 504) have been paused: no new loan numbers, no new approvals, suspended secondary-market activity. Mercadien+1

• The agency estimates that $170 million of SBA-backed loans are being held up for every business-day the shutdown continues — affecting roughly 320 small businesses daily. Small Business Administration+1

In short: if your deal relies, in whole or in part, on SBA-guaranteed financing, the risk of delay (or derailment) is real.

2. Why This Matters for Business Sales (and Deals)

2.1 Typical Deal Structure

In the trades, services, and owner-operated businesses in the $1 M–$50 M range, a very common structure is:

• Buyer down payment: 10-20%

• SBA 7(a) loan: 60-70%

• Seller note: 10-20%

This structure works because the SBA guarantee helps the lender mitigate risk and the seller receives meaningful cash at closing.

2.2 How the Shutdown Disrupts That

When the SBA is unable to issue loan numbers or finalize approvals:

• Even a “pre-approved” buyer cannot fund until the SBA releases the loan number. (Approval ≠ funding.)

• The lender may have completed underwriting, but cannot submit final documentation to SBA or receive the guarantee. Business News Daily+1

• That means most deals structured around SBA cannot close — even if all parties are ready.

2.3 Broader Implications

• The buyer pool shrinks: conventional buyers or all-cash offers become more attractive.

• Sellers may need to revisit terms (seller financing, earn-outs) to keep the deal alive.

• Even after the government reopens, expect a backlog of SBA applications that could extend closing timelines by weeks or months.

• For buyers: this pause offers time, but also introduces risk of losing a target if they cannot “move fast” when SBA resumes.

3. What Buyers and Sellers Should Do Now

3.1 For Sellers

• Communicate proactively. Staying silent while your buyer anxiously waits introduces risk of deal collapse.

• Stay running your business. Delays don’t justify taking the foot off the pedal. Performance counts.

• Revisit your deal-structure. Model alternative scenarios now (higher seller note, conventional financing) so you’re not scrambling later.

• Set clear decision points. Agree up front on how long you will wait before revisiting or renegotiating the deal (e.g., if shutdown extends beyond 60–90 days).

3.2 For Buyers

• Keep your documentation current. When SBA resumes, lenders will expect everything in order.

• Communicate with your lender. Even if the SBA is paused, lenders can continue underwriting and prepping. Use the time to stay ahead.

• Consider alternative financing. While higher cost, non-SBA acquisition financing may allow you to remain competitive.

• Be ready to move quickly. Once SBA operations resume, delays will matter less: speed and readiness will differentiate.

3.3 Strategic Adjustments

• Increase seller financing. If the buyer has strong credit, raising the seller note (to 30–40 %) may allow conventional financing instead of SBA.

• Focus on all-cash or private-equity buyers. These are less affected by the SBA pause.

• Sign the purchase agreement now; defer closing. Include a contingency for SBA resumption.

• Work with your broker or advisor to prepare “Plan B” financing structures so you’re not forced into sub-optimal terms when the shutdown ends.

This is why exit planning matters—take your Sellability Assessment now to see how prepared your business really is.

4. How Long Might This Shutdown Last — And What Aftermath to Expect

• Past federal shutdowns have ranged from a few days to more than a month. The 2018-19 shutdown lasted 35 days. Forbes+1

• Because the SBA retains only limited staff during a lapse in appropriations, processing times even after reopening will be extended. backlog + increased volume = delays. Mercadien+1

• For sellers and buyers: assume closing might be delayed by several weeks, perhaps longer if the shutdown drags on.

• There is also risk of deal fatigue: buyers may walk away, terms may shift.

5. Frequently Asked Questions

Q: If my lender or buyer has a “pre-approval”, does that mean we’re safe?
A: No. Pre-approval is meaningful, but the funding cannot occur without the SBA issuing a loan number. The shutdown includes the inability to issue new numbers. Business News Daily+1

Q: Are any SBA loans still closing?
A: Rarely. Loans that already had approved loan numbers issued before the shutdown may still fund. But new applications or number issuances are suspended. CDC Small Business

Q: Does this only affect new loans or also servicing of existing SBA loans?
A: It affects both new approvals and many servicing actions; many lenders report that routine servicing modifications and secondary-market activity are paused. Mercadien+1

Q: What can I do if my deal is delayed because of this?
A: Use the delay proactively: keep documents updated, strengthen business operations, revisit structuring, and stay in close conversation with your advisor/lender/broker.

6. Takeaway & Next Steps

• The shutdown may feel beyond your control, but how you respond is within your control.

• The businesses and buyers that succeed will be those who act with clarity, adapt structure proactively, and maintain momentum rather than freeze.

• If you’re planning to sell: think of this as a moment to prepare rather than panic. If you’re buying: this is a moment to position rather than pause.

• If you would like to talk through how this specifically affects your transaction (whether you’re seller or buyer), we at Lion Business Advisors are available to help model scenarios and plan for the path ahead.

Schedule a No-Obligation Review → https://lionbusinessbrokers.com/is-now-the-right-time-to-sell/ Let’s ensure you’re as ready as possible when the SBA gets back in motion.