Top SBA lenders left in the lurch by government shutdown

• Forward look: NewtekOne, a top SBA lender, reported strong third-quarter earnings Wednesday, but CEO Barry Sloane said the company’s fourth-quarter results could be crimped by a prolonged government shutdown. 
• Expert Quote: “We can’t live by the previous guidance given the basis of the government shutdown,” Sloane said.
• Key insight: The SBA approved more than $45 billion of loans in fiscal 2025.

The nation’s leading Small Business Administration lenders say they’ll be able to quickly resume normal operations if the long-running government shutdown is resolved in the next week or two.

But both Live Oak Bancshares in Wilmington, North Carolina, and Boca Raton, Florida-based NewtekOne say that an extended impasse will likely complicate matters, upsetting the timing of secondary-market transactions and creating the need for bridge loans to capital-strapped borrowers.

Indeed, the $2.4 billion-asset Newtek, which reported third-quarter earnings late Wednesday, declined to publish fourth-quarter projections, with CEO Barry Sloane saying the shutdown has rendered the future too murky to forecast.

“We can’t live by the previous guidance given the basis of the government shutdown,” Sloane said Wednesday on a conference call with analysts. 

Commenting on a conference call last week, Live Oak Chief Financial Officer Walter Phifer predicted the shutdown would have little or no impact on his $14.7 billion-asset company’s SBA lending operations — provided “it wraps up here in the next, call it, week or two.”

The shutdown began Oct. 1, after lawmakers failed to agree on a plan to fund health insurance subsidies that were authorized under the Affordable Care Act. Trump administration officials have been able to provide funding to keep many critical programs running over the past four weeks.

Now, though, that money is rapidly running out, leading key classes of federal employees, such as air traffic controllers and mine safety inspectors, to miss paychecks. Meanwhile, critical programs like the Supplemental Nutrition Assistance Program are at risk of being suspended, though a federal judge on Thursday expressed skepticism about the Trump administration’s argument that funding will soon need to be halted entirely.

The mounting consequences of the impasse prompted the American Bankers Association and the Financial Services Forum to join a broad coalition of business advocacy groups in urging an end to the shutdown.

“We urge Congress to swiftly pass a clean continuing resolution to reopen the federal government,” the groups said Thursday in a statement. “Immediately reopening the government would avert further economic disruption and give Congress and the Administration time to negotiate a longer-term funding package and address other pressing issues.”

From Live Oak’s perspective, a longer interval before the federal government reopens might delay some secondary loan sales, which have to be approved by the SBA, Phifer said on the company’s earnings call.

Moreover, both Phifer and Newtek’s Sloane said that a continuing shutdown might prompt their banks to consider the necessity of extending bridge loans to some hard-pressed clients.

The SBA enjoyed one of the busiest years in its 72-year history in fiscal 2025, which ended Sept. 30. Loan origination volume under its two biggest programs, 7(a) and 504, topped $45 billion. Both programs, along with some other parts of the agency, have stayed shuttered since fiscal 2026 began on Oct. 1.

On his Wednesday conference call, Sloane characterized Newtek’s fiscal 2025, which ended the day before the government shutdown began, as “effervescent.”

According to SBA statistics, Newtek ranked behind Live Oak as the second-most-active lender in the flagship 7(a) program, with loan approvals totaling $2.03 billion. That production helped drive third-quarter net income to $17.9 million, up 50% from the same period in 2024.

Live Oak originated $2.9 billion of 7(a) loans in fiscal 2025, according to SBA. 

“We had a very healthy third quarter,” Sloane said on Newtek’s conference call. “We’re very pleased that we have been able to demonstrate our ability to manage the bank, manage risk, and hit all of our strategic goals and objectives … according to plan.”

To date, a formula for ending the shutdown has proved elusive, with both Democrats and Republicans blaming each other for the impasse.

“The House-passed continuing resolution included vital measures to protect small businesses’ access to capital and ensure continuity for programs that entrepreneurs depend on,” House Small Business Committee Chairman Roger Williams said in a statement earlier this month. “By voting against this clean funding extension, Democrats have left Main Street without certainty.”

Rep. Nydia Velazquez, D-N.Y., the Small Business Committee’s ranking Democrat, pointed the finger at Republicans. “Instead of staying in Washington to negotiate, they left town, taking a vacation while millions of Americans face the prospect of soaring health care costs from expiring ACA tax credits,” Velazquez said.