The Post-Shutdown SBA Loan Surge: Why Expedited Life Insurance Is Critical for Timely Loan Closings
November 24, 2025
by Ben Koplan
CLU, CFP®, LifeEase
The Post-Shutdown SBA Loan Surge: Why Expedited Life Insurance Is Critical for Timely Loan Closings
Executive Summary
The recent 43-day federal government shutdown created an unprecedented backlog in SBA loan processing, blocking approximately $5.3 billion in capital from reaching 10,000 small businesses nationwide. With the government reopening on November 12, 2025, lenders are now facing a surge of loan closings as borrowers rush to access desperately needed capital. However, many of these transactions risk significant delays due to a frequently overlooked requirement: life insurance collateral assignment.
This white paper examines why business borrowers delayed completing life insurance requirements
during the shutdown, the current backlog crisis facing lenders, and how partnering with a specialized
business life insurance brokerage can prevent life insurance from becoming the bottleneck in an
otherwise ready-to-close loan.
The Government Shutdown and Its Impact on SBA Lending
Scope of the Disruption
During the shutdown period from September 30 through November 12, 2025, the SBA was unable to process or approve any new loan applications. For fiscal year 2025, the SBA had been on pace for a ecord-breaking year, having guaranteed 84,400 loans totaling $45.1 billion prior to the shutdown. The
agency had been averaging 320 loans per business day worth $170 million.
The shutdown effectively froze this momentum, preventing thousands of businesses from accessing capital for critical needs including payroll, equipment purchases, expansion projects, and working capital. States like California saw 212 loans per week valued at $126.8 million blocked, while Texas experienced 128 weekly loans worth $89 million frozen.
The Emerging Backlog Crisis
Now that the government has reopened, the SBA faces a massive backlog of applications requiring rapid
processing. Lenders are under immense pressure to close loans quickly for borrowers who have been
waiting weeks or months for funding. According to industry observers, this backlog represents “huge”
challenges as the agency works to sort through accumulated applications while simultaneously
processing new submissions.
For business borrowers, these delays have translated into postponed hiring decisions, deferred equipment purchases, and in some cases, layoffs and operational cutbacks. The urgency to close these loans has never been greater.
Why Borrowers Delayed Life Insurance During the Shutdown
The Wait-and-See Mentality
During the 43-day shutdown, many business borrowers adopted a wait-and-see approach to completing
loan requirements, including life insurance. With no certainty about when the government would reopen or when their loans would be approved, borrowers were hesitant to incur insurance premiums for policies they might not immediately need.
This caution was understandable given the unprecedented length of the shutdown and the uncertainty surrounding its resolution. Business owners facing cash flow constraints were reluctant to commit to monthly insurance premiums when loan funding timelines remained completely unknown…