How small business lending made the shutdown real for banks

Core Insights - The government shutdown has not significantly impacted most banks, but small and midsized banks are facing challenges due to halted Small Business Administration (SBA) loan processing [1][2][3] - Hundreds of billions of dollars in SBA loans are frozen, affecting community bankers and small business owners [4][6] - The shutdown has led to a complete halt in new SBA loan originations since October 1, which could negatively impact bank earnings in the fourth quarter [8][10] Impact on Small and Midsized Banks - Small and midsized banks are more exposed to government programs that are currently on hold, particularly SBA loans [3][9] - The SBA guarantees loans, making them attractive for smaller banks, but the shutdown prevents banks from collecting fees associated with these loans [5][6] - Small business owners are at risk of going under due to lack of access to capital during the shutdown, which could further strain banks if these businesses fail [6][8] Future Outlook - Analysts hope for a quick reopening of the government to recapture lost loan activity, but prolonged shutdowns could extend the impact into future earnings seasons [9][10] - The expectation is that there may be a surge in loan transactions once the government reopens, but the uncertainty remains a concern for bank earnings [9][10]