NEW YORK — Chris Leh, owner of a fledgling manufacturing company in Ephrata, Pa., recently landed the kind of deal growing companies dream of, with a major client whose order volume will triple annual sales to around $1.5 million.
Leh began seeking additional employees and lining up financing to buy equipment for his precision machine components company, TL Technologies. Last week, he was poised to close on a $1.5 million loan backed by the Small Business Administration. Then the government shut down.
Susquehanna Bank says it is prepared to cut a check — but can’t until the SBA and other agencies reopen and process some final paperwork.
“I have to go back to my customer and tell him I’m dead in the water and can’t fulfill his needs, and I can’t give him an answer when I can,” Leh said. “It’s put me in the most horrible position as a business owner that you can be in.”
The SBA says it backs an average of $96 million in small-business lending each day. Having that financing stream frozen sets off a chain reaction of economic pain, said Anthony R. Wilkinson, who heads the National Association of Government Guaranteed Lenders, a trade group. “There are restaurants that aren’t being opened and contracts that aren’t being fulfilled,” he said. “As this drags on into Week 2, people are getting pretty worried.”
At many banks, direct small-business lending is stalled, too, because much of the Internal Revenue Service is closed, preventing lenders from checking applicants’ tax information. Business owners are also grappling with the absence of other crucial services, like E-Verify, the online system companies use to confirm the eligibility of prospective employees to work in the United States.
Leh said his client is being patient and waiting for the shutdown to end. Leh extended offers to two prospective employees but can’t bring them on until the loan closes.
Also waiting, he said, are “the guys that I’m buying the machines from, the guys who move the machines, the electricians that come in and wire things up, the insurance company I’m dealing with — all of those people aren’t getting paid right now.”
Last week, he intended to turn over a check for $57,000 to JBM Technologies, a machine-tool distributor that works with manufacturing companies throughout the mid-Atlantic. The check, a down payment on the first machine Leh needs, would have gone to John Watkins, owner of the 20-person company. Instead, the $300,000 Kitamura machining center sits idle.
Watkins planned to have his staff begin work several days ago customizing Leh’s Kitamura. When the loan was delayed, Watkins scrambled to redeploy his employees. “We got busy at the right time with another project,” he said. “Without that, it would have been really bad.”
What irritates Watkins most about the standoff in Washington is that he sees it as a self-inflicted wound on an economy that was finally beginning to rebound.
Lynn Ozer, the president of Small Business Administration and government-guaranteed lending at Susquehanna Bank, has five clients, including Leh, waiting to close on loans. Many can be fast-tracked once the SBA reopens, but for those that require special handling, she worries about how long it will take the agency to dig out.
She is also braced for her loan business to dry up, especially with the Treasury expected to hit its debt ceiling Oct. 17. The last time Congress had this kind of standoff, in 2011, business confidence took a dive — and with it, Ozer said, went her clients’ willingness to borrow.
“Just as small entrepreneurs are willing to take some risks again, the government goes and begins to behave like irresponsible children,” Ozer said. “They make decisions that adversely affect the economy, when it’s so fragile to begin with.
“The real tea party threw tea into the Boston Harbor. These people are throwing businesses and people’s salaries.”