Government Shutdown – Effect on Small Businesses

Today, the United States enters Day 30 of a partial federal government shutdown. President Donald Trump and Congress are at a stalemate over border wall funding and border security. Currently, there are no plans in motion to reopen the government at this time.

Government Shutdown: What does this mean?

The federal government is a massive employer with more than 2 million civilian workers nationwide. These include the postal service, federal prison employees, and workers at our national parks. Bloomberg Business reports at least 800,000 federal workers (roughly 40 percent of those two million civilian employees) are affected. Some employees are continuing to work without pay where services remain open. This is because the government called tens of thousands of employees back to work including Department of Agriculture workers. The current government shutdown is now the longest-ever in the U.S. history, and statistics say it has a 40% chance of lasting into February. There is even a GoFundMe campaign started by Deepak Chopra and GoFundMe to help alleviate the needs of federal workers affected by the shutdown, which sits currently at $97,000 raised.

Furloughed employees have been a focal point of much of the media coverage to date.  Federal workers are not the only people feeling the shutdown’s impact. Small businesses, the backbone of the U.S. economy, are starting to feel the impact of the shutdown across the country.

Government Shutdown: Impact on small businesses

Businesses in the states with the largest number of federal employees are feeling the pinch. The government shutdown has greatly effected Washington, Alaska, Montana, New Mexico, South Dakota, and Wyoming. These states are also cutting back on regular spending. This makes it difficult for business owners to continue to conduct business as usual. Even though these workers will most likely receive their back pay, many families are reserving any extra money they have on hand for required expenditures like food and mortgage payments.

The New York Times reports that there is an overall decline in market optimism. Standard and Poor estimates that if the current shutdown reaches day 37, it will have cost the US economy $7.1 billion. White House economists also doubled their estimated impact on the economy this week, adding further worries for small business owners.

Should you worry about the government shutdown?

It really depends, in some cases yes, and in others not at all.

Government Shutdown: What happens to small businesses if there’s no funding?

Without government funding, the U.S. Small Business Administration (SBA) is closed. Entrepreneurs with pending loan applications for funding continue to wait until the SBA reopens. Other businesses struggling to approve vital licenses by federal regulatory bodies remain in a holding pattern while they wait for the government to reopen. Even businesses that remain unaffected financially by the shutdown have found that E-Verify, a popular online system used to verify that job candidates are eligible to work in the US is currently offline.

Some small businesses also rely on income earned from government funded contracts. What happens if they do not receive this pay because of the government shutdown? They cannot continue these projects or hire the contractors they need to complete the work. In fact, federal contractors have been estimated to be losing as much as $200 million a day in lost revenue directly related to the shutdown.

Government Shutdown: Good news for small businesses

By most conventional standards, the economy is still in a good place overall. With a low unemployment rate and accelerating wage growth, 2018 was a very strong year for economic growth. Consumers powered a strong post shutdown holiday shopping season with little hint of a downturn. This is good news for small business owners.

Not all small businesses report feeling the effects of the shutdown. Some businesses still see strong profits with no signs of change anytime soon. Overall, this means that businesses may consider getting creative with their outreach by exploring untapped methods to attract customers. With revenue declining for some, owners are working to increase sales by turning to alternative channels like social media marketing. Other businesses are benefiting from a boon of gig workers looking to make a little extra income on the side.

Government Shutdown: What comes next for small business owners?

It is difficult to say when the government shutdown will be officially over. For some businesses, it may take some time to get back on track. For others, its business as usual. Breaking news travels quickly. It’s important that business owners know as soon as possible so they can get back on track. As soon as we know the shutdown is over and communicate with the IRS, we will be working diligently to ensure your business and its needs comes first.

Our customer service team is a phone call, email, or tweet away from answering your questions. We will also assist with problem solving for your needs, and provide updates about the shutdown. We encourage customers to reach out to us if they need anything.

Has your small business been affected by the shutdown? Let us know in the comments section below.