It happened. As many business owners across the U.S. feared, the federal government shut down late Monday night. Today, more than 40 percent of the federal workforce—those deemed “non-essential” employees—were told to stay home from work without pay.
What does this mean for small business owners today? Here’s a look at how some small businesses are already being affected by the shutdown:
The SBA stops processing most loans.
The Small Business Administration is no longer processing loan applications due to the shutdown. Bankers rushed to file their SBA loan applications in recent weeks in hopes of getting them processed in time, according to The Washington Post. However, many loans have been left in limbo, leaving many businesses in a crunch. “It’s going to be really tough,” Tony Wilkinson, president and chief executive of the National Association of Government Guaranteed Lenders, told the Post. “You start looking for where small businesses get long-term loans, and the SBA is it. And the government shutdown turns off that spigot.” On a more positive note: The Office of Disaster Assistance will remain open during the shutdown, meaning businesses seeking disaster relief will continue to have a lifeline.
Government contractors brace for big losses.
Small government contractors fear they could lose much of their revenue stream—and even have to lay off or furlough employees. Five Green Research, a Brownsboro, Alabama company that provides engineering, logistics and information management to the military, has already been working on thin margins due to the federal sequester that took effect earlier this year. The government shutdown means delays on 13 of the company’s contracts and delays in hiring new workers. "We have been driven by the budget cuts and cost slashing so much this past year that the management reserves on our contracts are minimal," founder and CEO Joni Green told Inc.com. She adds: "We are only hiring if absolutely necessary. "I would have thought by this time this year, we would have hired three more [employees]."
Business owners feeling uncertain—and angry.
As the crucial holiday shopping season approaches, many small businesses are nervous. Even those outside of areas with a large government or military presence fear that the shutdown could cause consumers to rein in their spending in the weeks and months ahead. Gabe Sowder, owner of a taco truck in Louisville, Kentucky, worries about his sales and feels let down by federal lawmakers. “The government’s purpose is to protect people and business,” he told local news station WHAS11. “This is not acting in the best interest of really the citizenry or business at all.”
The big question now is how long the shutdown will last—as that will determine how big of an impact it will have on businesses' sales in the coming weeks and months. The 1995 shutdown lasted 17 days, according to USA Today, but many Republicans have predicted this one will be shorter. Unfortunately, there’s another federal fiscal battle waiting in the wings: The U.S. government will hit its debt ceiling on October 17 unless Congress agrees to raise it.
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