How the Shutdown Impacted Small Businesses

Although Congress and the President appear to have reached an agreement to fund the government for a brief period while they work on other issues, a great deal of damage has already been inflicted. Hundreds of thousands of federal employees went without pay or without work for over a month, and many key agencies slowed or stopped their activities altogether.

The ripple effects of the shutdown spread throughout the economy in ways both large and small. One key group impacted by the shutdown is small businesses which rely on smooth government operations so they can continue to run.

Here are some of the ways the shutdown impacted these companies:

  • Support Businesses: Small businesses often spring up in areas where large numbers of federal workers will utilize their services, especially in Maryland, Virginia and the Washington, DC, areas. Everything from diners/restaurants and coffee shops to office supply stores and delivery services lost untold amounts of income which can never be fully recovered.
  • Service Businesses: Federal employees often keep many local businesses humming. If they don’t have money coming in or don’t know when they will be paid, they count their pennies very carefully and don’t spread dollars through the community to local businesses, salons, mechanics, groomers and shop owners.
  • Small Business Loans: Funding that entrepreneurs rely on to start, run or expand their business has been in limbo as the Small Business Administration stopped approving routine loans. The time it takes the SBA to work through the backlog might mean that deals could be lost or businesses might fold.
  • Farmers: Agricultural entities hurt by the China tariffs have not been able to secure crucial Agriculture Department loans or money from the President’s fund to keep their farms going. This may impact their ability to buy equipment and supplies for the spring planting season.
  • Landlords: Rental companies and landlords might have difficulty receiving payments from HUD renters while the government ramps up again.
  • Licenses: The federal government routinely processes and approves many types of licenses which enable small businesses to operate. One example is that craft brewers can’t get their new beers approved because the Alcohol and Tobacco Tax and Trade Bureau had closed. This delay might mean they will not be able to introduce new beers down the road.
  • Employees: Companies cannot hire new employees because they cannot use the E-Verify system to find out whether applicants are in the country legally. If they did hire someone without the proper paperwork, they might face the prospect of hefty fines.
  • International Shipments: Many companies use the internet to expand their product base to a worldwide market, but they might have difficulty shipping their products overseas until the Commerce Department is fully functioning again.

Although federal workers are likely to receive back pay soon, government contractors will not. The long-term impact on businesses which rely on them is yet to be seen. Even if funds start flowing again, federal employees are unlikely to spend twice as much in February to catch up for what they did not spend in January.

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