Impact of Government Shutdown on Small Businesses

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Impact of Government

It has been more than 19 days, and the partial government shutdown is still continuing in the US. Television channels are roaring about the impacts of such a standoff and businesses are panicking. This present scenario -termed the second longest shutdown in the history of the United States -is building up frustration across different walks of life. Every passing day makes the impact grimmer and more difficult to fix.

Apparently, the government shutdown appears to be affecting government agencies. Just a false picture portrayed! The reality is the opposite of this. It is not only limited to the closure of government agencies but also furloughed workers or the closure of the country’s national heritage. It is equally catastrophic for small businesses. A sorry state of affairs for entrepreneurs and small business owners. They not only bear the loss of clientele but also face limited access to government resources.

Some of the consequences that small businesses suffer due to shutdowns are:

  1. When your clientele is among the top sufferers of the shutdown

Your business is going to be shaken if the majority of your clients are federal government employees or contractors. As, during the shutdown, many federal programs deemed nonessential are halted for an indefinite period of time. Federal workers are furloughed and their salaries are held back. The same applies to those businesses which deal with military personnel. Though military services remain operational during the shutdown, the salaries are not paid. Therefore, businesses operating in Washington, D.C., and Norfolk, Virginia deemed to be hard hit because these are strong government and military areas.

  1. When your business is dependent on tourism and sightseeing

The government shutdown is going to hit those entrepreneurs badly who own a business near a tourism/national heritage site. The tourist attractions that are managed and operated by the federal government suffer closure during this time.  The one who owns a small coffee shop in a national park or runs a souvenir shop outside the heritage museum is punched harder by this uncertainty. The holiday season not only brings in local tourists to these sites but also the international tourist(s) has seen a plummet in the ongoing state of affairs.

  1. Government contractors will lose money

Businesses no matter how large or small they are, contract with the federal government. These government contracts, without any aggregation, are the survival kits for small businesses. They boost revenue generation and provide a strong business foothold. The shutdown puts a temporary halt to these contracts. Small entrepreneurs are bound to lose their main source of income in this standoff. The losses are not only limited to this but going further, during the shutdown, all the payments for the completed contracts are also stopped until government operations are resumed as normal. And once normalcy is attained, there is always a hefty backlog to cater for thus causing further delays in payments. Therefore, small contractors need to consider small business loans as a backup plan to deal with these challenges.

  1. Suspension of passport and visa services

Passport and visa services are suspended till the shutdown is over. Entrepreneurs seeking visa renewals need to wait and postpone their business trips. These delays result in halted business operations. The suspension of passport and visa services due to the COVID-19 pandemic has been a rising matters of concern for individuals and organizations worldwide.

  1. Delay in the receipt of EIN (Employment Identification Number)

One of the numerous ways in which a government shutdown can impact new businesses is a delay in the receipt of an Employment Identification Number (ENI). This number is just like social security number. A new business must obtain EIN in order to be operational because it is mandatory for bank account opening, small business loan applications, etc.

  1. SBA (Small Business Administration) Closure

All the SBA-backed loans are frozen during the shutdown. Therefore, during the government shutdown, all the small businesses are lurking in a state of uncertainty regarding their loan applications. They are forced to look for short-term borrowing options at a high-interest rate in order to keep their businesses rolling. Even after the shutdown ends, there will be a high number of backlogged applications pending with SBA for loans. So small businesses must be ready to put their entrepreneurial dreams on hold till the ripe time revives. Small business loans are the best rescuers for budding businesses during this period of time. Talk to a professional at BitX Funding to get expert advice.

  1. Delay in Employment Verification

Employers are bound to E verify any potential hire within three days of hire. This becomes very challenging for small businesses because the employment verification system becomes unavailable during the shutdown.  So small businesses that rely mostly on their workforce need to plan differently to keep the wheel running.

  1. IRS Closure

The Internal Revenue Service (IRS) gets closed during the shutdown. The shutdown does not exempt businesses from tax payments till the government is up and running. But if there is any tax issue, the shutdown at IRS makes it difficult to be resolved. All the tax refunds will be cleared after the shutdown. Therefore, small businesses counting on this money should be well prepared for any such possible delays.

The businesses that have planned their finances in light of any expected tax refund, need to wait and find an alternate solution-Small Business Loan -to pay off their debts. The businesses that need tax documents for applying for small business financing also need to wait till the bar is lifted.

In short, the government shutdown has its toll on small businesses. Despite the rumblings over media and other communication networks portraying government employees and the departments to be the hard stricken, the small businesses also bear damages. Thus a timely end to this standoff is the need of the hour otherwise the small businesses will be the most bruised soldiers in this war of power mongers. If the standoff continues, the small business owners will be in hot waters. We always hope that every new start-up is best planned and enough reserves have been squirreled away to meet the business challenges. All this demands deep business acumen, a passion for work, and a commitment to deliver the best.