5 ways government shutdowns hurt small business

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5 ways government shutdowns hurt small business

Author: Caron Beesley | January 9, 2019

Government shutdowns, or their intimidation, have become a way of life in today’s political climate. The 16-day government shutdown in 2013 resulted in 24 billion dollars in lost economic output and there seems to be no end to the present as each side struggles over funding priorities.

In this article, the first in a two-part series on the government shutdown, we’re looking at how the incident impacted the small business community.

Here are five scenarios when a government shutdown can hurt small businesses.

1. When Your Client is a Federal Government or a Contractor

The federal government is biggest single buyer goods and services around the world, awarding $500 billion in contracts each year. Everything from paper clips to rockets, computer software to marketing communications services, government buys out. And it’s not just from the big contractors.

The Small Business Administration (SBA) works with federal agencies to award nearly a quarter of major government contract dollars to small businesses that align with regulatory goals. As they are known, these “plugins” generate millions of dollars in payments and support a vast ecosystem of prime and subcontractors.


When the government shuts down, not only do federal contracts stop paying, but bidding opportunities for new business dry up, as everyone (except key government employees) drops. gradually. Even during the January 2018 shutdown, contractors received “stop work” orders from the agencies. This equates to a stressful time for small business and can cost employees and subcontractors their jobs, at least temporarily.

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2. If you are looking for an SBA loan

During the government shutdown, the SBA stopped processing loan applications submitted by financial institutions on behalf of their customers (the SBA did not provide the funds, they instead guarantee the loan that gives life to the lender) if the business owner defaults). In fact, it’s against the law for federal employees to do any work, even check email, when they’re in a pinch.

If your small business is looking for cash to grow or expand, you won’t get an answer as to whether a loan has been approved until the government is back up and running. The exception is SBA disaster loans helps small businesses and home owners recover from declared disasters.


During the extended 2013 outage (16 days), 700 loan applications piled up in a queue while the office was closed. washington articles quote some examples of small business owners left in limbo as the SBA holds their loans. For example, Chris Leh, president of TL Technologies in Lancaster, PA., told a congressional hearing that he had to cancel a $600,000 equipment order and cancel two job offers for the company. mechanics are highly trained because his SBA loan application was not approved prior to closing in 2013.

Current SBA Administrator, Jeanne Hulit, Written, “During the shutdown, I heard from small business owners about contracts being canceled or postponed, workers they had to add, the ability to reduce shifts and cut staff… many small businesses are still struggling to know how to take care of their employees. when they see projects being postponed”.

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3. If your livelihood depends on tourism

One of the indelible images of all government shutdowns is the closure signs posted outside national parks and landmarks. While some parks remain open during the current closure, despite reduced service levels, many smaller locations have closed. If your business is in the vicinity of a park, any closure could have serious consequences.


Cancellations and drops in traffic threaten the livelihoods of small businesses. The cost of closing a National Park is already at $5 million and growing and our nation’s parks face year of damage the result is.

4. If you are going to rent

An overlooked aspect of the government shutdown is the government Website E-Verify used to verify the eligibility of individuals to work in the United States During any downtime, Department of Homeland Security and USCIS, employers will not be able to access their online accounts.


While it won’t delay your hiring plans (USCIS generally approves an alternative), the shutdown of E-Verify puts businesses at risk of non-compliance if they skip this crucial step. This is important to secure a legal workforce.

5. If military is your big customer

Without an exemption, military personnel could be fired and lose wages during the shutdown.


If your business is located near a military base or located in a military area, the lack of disposable income can hit your business hard during an outage.

Key point

In the short or long term, a federal government shutdown can affect business operations and plans. The outage is a devastating blow to small businesses and affects their ability to serve customers, access finance, invest, and ultimately grow.

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Based on Most small businesses, every time the government closes the store, it lowers consumer confidence and creates a huge amount of uncertainty.

Stay tuned for part two of this series, where we’ll discuss ways small businesses can plan for and mitigate the impact of a government shutdown if and when they happen.

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