Impact of SBA Firings on Business Loan Processing is Still to be Determined
Chaos. Disruption. Disarray. Upheaval. Bedlam. Those words describe the mass confusion that occurred recently at the Small Business Administration, the federal agency that is a key franchise funding resource.
The turmoil started last Friday evening, when a few hundred probationary employees of the SBA received termination notices via email, Politico reported. The SBA firings resulted from a review of the agency by the Elon Musk-led Department of Government Efficiency, or DOGE. (Most of those workers are probationary because they have spent less than a year in their jobs.)
A Mistake… Then Not
SBA supervisors didn’t receive a heads-up that the terminations were coming and immediately tried to figure out what was going on. By Monday afternoon, they determined the notices were sent by mistake.
“Probationary employees across the Small Business Administration may have received an unsigned notice of employment termination,” stated a Monday email viewed and cited by Bloomberg News and reposted by Yahoo. “Please be advised that this draft letter (see attached) was sent in error – and as such, it is not currently in effect. If you are in receipt of the initial notice, your employment has not been terminated as was erroneously indicated in the initial notice.”
Then on Tuesday, shortly after President Donald Trump signed his executive order requiring federal agencies to cut their workforces and reduce hiring, at least some of those probationary employees received nearly the same email again, but with one significant change: Their jobs ended immediately, according to Business Insider, which was given access to the later email. Friday’s “mistake” email had said the terminations would take effect Feb. 21.
Impact of SBA Firings
It was not immediately clear whether the SBA firings would slow the agency’s work in processing business loans and other assistance. The SBA, established in 1953, provides counseling, capital and contracting expertise for small businesses.
Small Business Administration loans, which are issued by private SBA-approved lenders and partially guaranteed by the SBA, are popular options for franchise funding and may be used for the purchase or refinancing of real estate, buildings and equipment, and for working capital. Almost $13 million in SBA loans have been issued so far this year, with the average loan size being about $430,000 and many loans only in the tens of thousands, according to the SBA.
The SBA also provides low-interest loans to help businesses of all sizes, as well as homeowners and renters recovering from declared disasters including wildfires and hurricanes.
Reaction from Employees, Union
A fired probationary worker who requested anonymity told Business Insider: “I’m in disbelief. My directors are shocked, too, since they didn’t even know I had been terminated until I called them.” Stacy, a fired worker who allowed Insider to use her first name, said, “This is the government. You would think it would be more organized. I’ve never encountered anything like this.”
Everett Kelley, president of the American Federation of Government Employees, the largest federal employee union, released a statement harshly criticizing Trump’s executive order and workforce purge, Politico reported. “Firing huge numbers of federal employees won’t decrease the need for government services,” Kelley said. “It will just make those services harder or impossible to access for everyday Americans, veterans and seniors who depend on them.”
Buckle Up for More Firings
More firings are expected. The Office of Personnel Management has asked agencies to compile lists of poor-performing employees and to assess which probationary staffers are essential, the Bloomberg/Yahoo report said. Unions and individual workers are expected to sue, and civil service laws and union bargaining agreements could upend some layoffs. Reports indicate 75,000 employees have accepted buyouts offered by the Trump administration. That may sound like a lot, but – excluding military personnel and postal workers – there are 2.4 million-plus federal employees, according to the Trump White House.
Under Tuesday’s executive order, Fortune noted that each department can hire “no more than one employee for every four employees that depart.” In addition, the magazine reported that the heads of departments for every federal agency have been ordered to develop a data-driven hiring plan in consultation with DOGE “to ensure new career appointment hires are in highest-need areas.”
During a visit to the White House Oval Office when Trump signed the executive order, Musk said there is public support for the terminations. “If the bureaucracy is in charge, then what meaning does democracy actually have? It does not match the will of the people, so it’s just something we’ve got to fix.”
Large, abrupt layoffs are part of Musk’s leadership style. For example, after buying Twitter Inc. in 2022, he fired thousands of employees although he later asked some to return. Another workforce reduction tactic was documented in a Wall Street Journal opinion article from Musk and Vivek Ramaswamy, his former DOGE co-leader. “Requiring federal employees to come to the office five days a week would result in a wave of voluntary terminations that we welcome: If federal employees don’t want to show up, American taxpayers shouldn’t pay them for the Covid-era privilege of staying home,” they wrote.
Who’s in Charge?
Emails notifying workers of the SBA firings included an SBA paralegal’s contact information for appeals, Business Insider reported. But the phone number listed connects to a luxury apartment leasing company’s voicemail, and the publication did not receive a reply to an email it sent to the paralegal’s address.
Everett Woodel is currently the acting SBA administrator. Trump nominated Kelly Loeffler, a former U.S. senator from Georgia, to serve as the agency’s permanent head. She still needs Senate confirmation.
