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How the Latest Government Shutdown May Impact Your Small Business

The 2019 Government Shutdown and What it Means for Small Business

We are now on the third government shutdown of the last 13 months, with the two previous instances taking place in January 2018 lasting two days and February 2018 for just nine hours. The impact of both shutdowns was minimal.

This time around President Trump is insisting the shutdown will not end unless Congress funds the border wall. So far no one has blinked, but the longer the shutdown lasts, the more its impact will permeate into the lives of ordinary Americans across the country.

If it continues much longer, small businesses will start experiencing the negative effects of the shutdown the moment they have to deal with the federal government. This could involve everything from Small Business Administration loans to receiving payment for federal contracts.

The 2019 Government Shutdown

The shutdown started on Dec. 21, 2018 at midnight because Congress couldn’t agree on a spending plan which included the $5 billion Trump wanted for the border wall.

With the holidays falling on Monday and Tuesday, the full impact of the shutdown wasn’t felt across the country immediately. But later in the week, hundreds of thousands of government employees who were not deemed essential from different departments were furloughed or began working without a salary.

The shutdown also meant closing the Agriculture, Commerce, Justice, Homeland Security, Interior, State, Transportation, Treasury, Housing and Urban Development departments as well as some federal agencies.

Federal agencies and departments which were funded prior to the shutdown were not affected.

The Impact on Small Business

The impact of a prolonged shutdown on small businesses will be considerable. Everyone from restaurants to dry cleaners, retailers, gardeners, and small businesses in many other industries will see fewer of the hundreds of thousands of federal employees in their place of business.

In addition to seeing fewer customers, business owners will also have a hard time accessing federal resources.

For new startups, this means they might not be able to get their employer identification number (EIN). This number is essentially the social security number for businesses.

Without an EIN number, a business can’t in earnest start their operations because they won’t be able to open a bank account and make payroll for their employees.

Regarding employees, if a small business is going to hire a new person, it means the E-Verify system will not be available. For businesses operating in states with mandatory E-Verify, they have to verify a new employee within three days of hiring.

A long shutdown will mean these businesses might have to wait until the federal system is back on. This is yet another unintended consequence of the current impasse in Congress.

Some of the other issues small businesses could be facing include taxes, SBA loans not being available, and federal contracts stop paying out. With $105.7 billion in federal contracts awarded to small businesses in 2017, this translates to tens of millions of dollars in payments the owners won’t be getting.

The impact of a government shutdown affects local, state, national and international businesses. How has the shutdown affected your business?

Image: Shutterstock


Michael Guta

Michael Guta Michael Guta is a Staff Writer for Small Business Trends focusing on business systems, gadgets and other small business news. He has a background in information and communications technology coordination.

7 Reactions

  1. Yes, You are right. These businesses might have to wait until the Federal Businesses back on peak. These kind of business opportunities will be beneficial for the employs and also for the small business owners.

  2. EIN application is an automated process which can be done here: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

    Any CPA that knows anything should be able to do that.

    • I’m not sure that the link is working. I’ve been trying to apply for a couple of hours and keep getting an error saying to check back later.

    • If you are able to apply via the online portal, that will work. There are instances, however, where the IRS will deny the online application due to previous filings, etc. I have several that I am trying to resolve at this moment and the fax number to submit rings a constant busy. Also the number I have to speak with an IRS representative is “unavailable”, so if there is another “magic” way that you know of, Andy, I would greatly love to hear it!!!! This has become quite frustrating!!! Thanks!!!

    • Andy, while that is the case, any business couldn’t register a vehicle in the state of Massaxhusetts for the first time without a 147c letter. Unfortunately those are not being issued and business owners cannot call to obtain them. That does impact business especially those with mobile operations.

  3. Michael Guta

    Hi Andy,
    Thank you very much.

  4. Aira Bongco

    It does have a massive impact because the longer the shutdown is, the longer its effect on revenue.

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