Government Shutdown Would Close Pipelines of Credit to Main Street Businesses As Republicans and Democrats draw battle lines in the sand, small businesses seeking capital may be left in the cold.

By Catherine Clifford

Opinions expressed by Entrepreneur contributors are their own.

The political bickering on Capitol Hill may very well take hostage some small-business owners on Main Street who are seeking access to financing.

If Democrats and Republicans in Washington fail to strike a deal by midnight tonight, then large swaths of the U.S. government will shut down. In that case, most essential services -- including mail services, national security and air traffic controlling -- would continue to operate. However, many other services would be halted, including processing for new small-business loans in the U.S. Small Business Administration's loan portfolio.

At the heart of the congressional standoff is Obamacare. House Republicans have passed a bill that would fund the government on the condition that President Obama's Affordable Care Act be delayed. The bill is unlikely to pass, as the Senate has pledged to reject any government bill that puts the act in jeopardy.

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The SBA hopes that Democrats and Republicans are able to come to the table before shutdown operations are forced to begin. "The Administration strongly believes that a lapse in appropriations should not occur," the SBA says in a statement. "There is enough time for Congress to prevent a lapse in appropriations."

However, even as the SBA hopes that Congress can pass a bill to fund the government beyond midnight, it has filed a plan with the White House Office of Management and Budget outlining its strategy in the case of a government shutdown. The plan breaks down which SBA operations and employees would be considered essential and which would be non-essential.

According to that plan, the SBA's flagship lending program for small-business owners, the 7(a) loan program, would be closed. Dozens of other loan programs -- including the 504 Certified Development Loan Program, which is accessed by small-business owners for loans to buy large fixed assets and real estate -- and many mentorship programs, including the SCORE system and Veteran's Business Development offices, would be shuttered in the case of a government shutdown.

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If you currently are paying off a loan that you obtained from a bank through an SBA program, don't fret. SBA-backed loans that are already approved and in operation will not be put in jeopardy by the shutdown. For those loan programs that do close down, the SBA will establish an online queue where small-business loan applications will be stacked in order that they are received.

Meanwhile, disaster loans, also part of the SBA's portfolio, would not be suspended in the event of a government shutdown. Part of the SBA's congressional mandate is disbursing loans to businesses and homeowners in areas devastated by tragedy, such as where Hurricane Sandy barreled through the Northeast or in areas out West ravaged by wild fires. Those programs are considered essential and would not be interrupted.

As part of the federal shutdown, many employees will be furloughed, or forced to take unpaid time off. Presidentially-appointed SBA officers and disaster loan officers will not be affected by the government shutdown, but across the board, 62 percent of SBA employees would potentially be subject to furlough if Congress does not pass a funding bill.

The SBA has put its shutdown plans in order, but it doesn't want to have to use them. "It is our hope that this work will ultimately be unnecessary and that there will be no lapse in appropriations," the SBA says.

Related: This Kind of Cluster Could Actually Help Your Business

Wavy Line
Catherine Clifford

Senior Entrepreneurship Writer at CNBC

Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.

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