SBA loans are unlikely to be affected by the Trump administration’s federal funding freeze, based on guidance provided by the Office of Management and Budget (OMB).
Despite the White House, on Jan. 29, rescinding a sweeping memo that called for a federal funding freeze, press secretary Karoline Leavitt clarified on X that while the memo has been revoked, the spending freeze itself is still in effect.
On Monday, Jan. 27, the Trump Administration ordered a pause of federal grants, loans and other financial assistance programs. Federal agencies were instructed to review all of their spending programs to ensure they’re aligned with President Trump’s executive orders. This announcement led to widespread uncertainty among business owners, nonprofits, local governments, universities and other recipients of federal money, as there was little guidance on exactly which programs would be affected.
A day later, OMB released a clarifying memo, explaining that only funding related to the president’s previous executive orders would be impacted. The memo stated that “funds for small businesses, farmers, Pell grants, Head Start, rental assistance and other similar programs” would not be paused.
The funding freeze was temporarily blocked by U.S. District Judge Loren AliKhan minutes before it was set to take effect at 5 p.m. EST Tuesday. In response, OMB canceled its original memo, leading to further confusion on Wednesday.
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SBA loans are likely not affected by the federal funding freeze
Most SBA loans, including the popular SBA 7(a) loan program, are not issued by the federal government directly, and as a result, are unlikely to be affected by a freeze in federal funding. Instead, the U.S. Small Business Administration partially guarantees loans issued by participating lenders, like banks and credit unions. This government guarantee makes SBA loans more accessible for a variety of small businesses.
SBA disaster loans and microloans, however, are funded by the federal government. SBA disaster loans provide financing to help small businesses recover from physical and economic damage caused by a declared disaster. These loans are issued by the SBA directly.
Similarly, SBA microloans, which offer funding of up to $50,000 to traditionally undeserved businesses, such as startups, women-owned companies and businesses located in low-income communities, are funded by the SBA and distributed by approved intermediaries, typically nonprofit and community lenders.
Because these programs are funded by the SBA itself, they could be potentially affected by a freeze in federal funds. However, OMB has indicated that they are not currently impacted.
Are other SBA programs vulnerable to federal funding restrictions?
The SBA funds business development centers, loan programs, federal contract opportunities, among others, that focus on women- and minority-owned businesses. Earlier this month, the SBA awarded $26.5 million to create 13 new Women’s Business Centers and support 17 existing centers across the U.S. These types of programs could be at risk in the future — as OMB has identified diversity, equity and inclusion (DEI) programs as a target of the funding freeze.
The now-rescinded memo also called out “the green new deal,” which could impact the SBA’s increased focus on funding clean energy projects. Last summer, for example, the SBA announced a new Green Lender Initiative to enroll additional climate lenders in SBA loan programs. The agency also expanded Community Advantage lending to increase flexibility for climate-focused projects.
At the time of publication, the SBA had not responded to NerdWallet’s request for comment.
Frequently Asked Questions
Will SBA disaster loans be impacted by a federal funding freeze?
The most recent information released by the Office of Management and Budget indicates that SBA disaster loans are not impacted by the federal funding freeze. The SBA is also still accepting disaster loan applications for those affected by the California wildfires, Hurricane Helene and Hurricane Milton.
Will my current SBA loan application be affected by the federal funding freeze?
The SBA may be slower to process and approve applications, due to the confusion surrounding the freeze order.
Can I still apply for an SBA loan?
Yes, you should still be able to apply for an SBA loan through an approved lender. SBA loans are typically slow to fund and may take even longer as a result of the federal funding freeze. If you’re looking for a faster alternative, consider online business loans. These loans can fund in as little as 24 hours, but come with higher interest rates.
Are federal grants for small businesses affected by a federal funding freeze?
Federal programs like the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs provide grants to small-business owners. The most recent information released by the Office of Management and Budget indicates that funds for small businesses are not impacted by the federal funding freeze.
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- 1. U.S. Small Business Administration. SBA Administrator Guzman Grants More Than $26M to Create 13 New Women’s Business Centers. Accessed Jan 29, 2025.
