Another Federal Government Shutdown Would Impact Small Business in Many Ways

Impact of the 2018 Government Shutdown on Small Business

Another federal government shutdown could happen this week.

If Congress does not pass at least another stopgap spending plan for the federal government by midnight Thursday, they’ll shut down Washington DC for a second time in 2018. And with another shutdown comes more adverse impacts for small business.

And one Representative in the House Small Business Committee says temporary spending plans aren’t good enough for small businesses. Rep. Nydia Velazquez (D-New York), a member of the House Small Business Committee, says, “Passing stopgap measures every few weeks to keep the government running, instead of a long-term spending bill, results in uncertainty for small firms that contract with the federal government, can potentially disrupt the flow of capital to small companies and, ultimately, undercuts entrepreneurs’ ability to create jobs in local communities.”

There are both direct and indirect impacts on small businesses caused by the federal government shutdown.

“Small businesses in particular will be hard hit, losing out on procurement opportunities, access to capital and entrepreneurial services,” says Velazquez.

Impact of the 2018 Government Shutdown on Small Business

Here’s a look at the impact another shutdown would have on small businesses nationwide.

Small Business Administration Closed

The federal government closing for business literally closes the doors at the SBA in Washington and at many field offices across the country. Not only are the offices closed, but SBA employees are not permitted to access agency emails and can not, in any way, represent the administration during the shutdown.

Here’s the notice the SBA has posted on its website during the shutdown:

Please be advised, during the furlough period, non-excepted employees will no longer be permitted to utilize SBA email or other federal resources. Please know that use of federal resources while on furlough status is prohibited by law and is considered a criminal offense. Employees must NOT represent the agency in any formal or informal capacity.

The lone exception to this is the availability of SBA Disaster Assistance services, including access to loan capital granted through the program. This is awarded to small businesses that have endured a natural disaster and likely impacts thousands of small businesses this year who survived one or more hurricanes.

SBA Loans Dry Up

Without an SBA to mitigate loan applications, specifically through the agency’s 7(a) loan program, small businesses will have to wait out this recent shutdown. There are no employees to process any applications to or payments made through the loan program.

If your small business is reliant upon one of the SBA backed loans for critical cash to stay afloat, this government shutdown came at the worst possible time. If you’re expecting this loan money to expand your business, it’s likely you’ll have to put those plans on hold until a 2018 spending plan is approved by Congress.

The House Small Business Committee suggests the shutdown could prevent $110 million a day from getting to small businesses through the stalled 7(a) program.

National Parks Close Killing Tourism Industry

If your small business is located nearby any federal park, you’re bound to find out soon enough that they’ll be closed and no one will be visiting. If you run a small restaurant, hotel or bed-and-breakfast, or even some niche boutique shop that appeals to park visitors, you’ll likely notice a drop in foot traffic during a government shutdown.

According to a New York Times report, the previous government shutdown did not force the full closure of national federal parks. However, closures are increasing and if the impasse in Congress continues, the parks will close entirely and hurt businesses that depend on traffic created by the federal lands.

Federal Contracts Stop Paying Out

Small businesses that get rewarded federal contracts from the government can expect not to get paid for any work done on that contract during the shutdown.

This is one major way small businesses are impacted by a government shutdown. Some businesses survive solely because of these contracts. Others make critical growth plans based on their ability to secure a federal contract and get paid for it.

The House Small Business Committee believes this could halt contract payments of more than $300 million in total from getting to small businesses.

This often creates some tense times at small businesses and has even cost people their jobs — at least temporarily — during previous shutdowns.

Federal Employees Aren’t Getting Paid

People who work for the federal government, for the most part, will not be showing up for work until the government shutdown is ended. Yes, many will be paid for their lost time retroactively but until then, that’s a lot of federal employees not coming to work and then not going to lunch or shopping near work. This means these federal employees will be missing from a restaurant’s lunch rush, for example, until the shutdown is over.

Photo via Shutterstock

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Joshua Sophy Joshua Sophy is the Editor for Small Business Trends and the Head of Content Partnerships. A journalist with 20 years of experience in traditional and online media, he is a member of the Society of Professional Journalists. He founded his own local newspaper, the Pottsville Free Press, covering his hometown.

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