SBA Must Offer 1% Emergency Loans to Small Businesses During Government Shutdowns

When the government shuts down, it’s not just federal workers who stop getting paid; the ripple effect hits small businesses hard. Think of the coffee shop across from the federal building, the contractor waiting on a final approval, or the local supplier whose biggest client is a government agency. This proposed bill, the Keep Main Street Open Act, is designed to throw a lifeline to those businesses caught in the crossfire.

It mandates that the Small Business Administration (SBA) establish an emergency loan program specifically for businesses during a partial or full lapse in appropriations (a “shutdown”). The key terms are incredibly favorable: the loan amount is based on the losses the business estimates it incurred due to the shutdown, and the maximum interest rate is set at a remarkably low one percent. The repayment clock is short, though, with the full loan maturing one year after the shutdown ends. The bill defines a “shutdown” as the period starting with the lapse in funding and extending 30 days after appropriations are finally enacted.

The Shutdown Safety Net

For the small business owner—the restaurant manager, the independent IT consultant, or the specialized manufacturer—this bill provides a critical bridge. If a shutdown drags on for weeks, cash flow dries up fast. This program offers immediate, low-cost capital to cover those estimated losses. For example, if a catering company loses $15,000 in contracts due to a facility closure caused by the shutdown, they could apply for a $15,000 loan at 1% interest to cover payroll or rent until the government reopens and business returns to normal. The eligibility criteria are tied to the existing definition for SBA 7(a) loans, meaning the program targets established small businesses.

The Fine Print on Repayment

While the 1% interest rate is a massive win, the short maturity period—one year after the shutdown ends—is the part that requires careful planning. This isn't a long-term financing solution; it’s emergency aid that needs to be paid back quickly. For businesses that take a while to recover after a shutdown, managing that accelerated repayment schedule could be challenging. On the flip side, the short term prevents businesses from accumulating years of debt from an emergency situation, keeping the cost to the taxpayer low and the debt burden manageable for the recipient.

Who Bears the Risk?

This program essentially asks the federal government to step in and absorb the immediate financial risk of a shutdown, rather than letting it fall entirely on Main Street businesses. Because the loans are capped at 1%, the SBA won't be making money on this; they'll simply be covering the cost of providing the loan. The biggest challenge, as always with emergency programs, is implementation. The SBA would need to quickly set up a system to verify and approve these loans during the very period the government is supposed to be partially closed, which is a significant administrative lift. Furthermore, the provision allowing businesses to estimate their losses could be an area where some applicants might overstate their claims, requiring the SBA to develop fast, effective auditing measures to ensure the funds are used responsibly and accurately reflect the shutdown’s impact.