It’s official! This government shutdown is longest in U.S. history. Politics aside, this shutdown has affected more than just the government employees, but many small businesses, too. Some directly and indirectly.
The shutdown has affected Greater Phoenix SCORE as our offices are located at the Small Business Administration’s Arizona Chapter offices. They are shutdown.
Here are some ways that small businesses may be impacted…
“The impact of a prolonged shutdown on small businesses will be considerable. Everyone from restaurants to dry cleaners, retailers, gardeners, and small businesses in many other industries will see fewer of the hundreds of thousands of federal employees in their place of business.
…”For new startups, this means they might not be able to get their employer identification number (EIN). This number is essentially the social security number for businesses.
“Without an EIN number, a business can’t in earnest start their operations because they won’t be able to open a bank account and make payroll for their employees.” Small Business Trends
If your business — say a restaurant — is located near a federal building, the majority of your customers may have been furloughed. Even if they live nearby, with limited income, they’re probably not going to eat out.
If you’re a government contractor…
“Small businesses are feeling the impact of the shutdown more sharply. Smaller government contractors might rely on just a few contracts that provide a large portion of their annual revenue, and transferring employees onto other contracts can be difficult.” This Washington Post article goes into more details….
David McClean, our resident SCORE mentor who teaches the class on how to win and deal with government contracts says,
The keyword here is "contract". You have a contract with the government. It's still valid.
It's like any employer, if there are no operating funds, the business closes. David suggests checking your contract for any contingencies on shutdowns. You may want to consult a lawyer.
What about Government Services?
Besides affecting neighborhood small businesses, entrepreneurs may be affected when it comes to government services. Like SBA loans. As I mentioned above, the SBA offices are closed so are all of their services. They stopped processing loans on Dec. 22, 2018.
“Businesses can’t get SBA loans, and farmers can’t get Agriculture Department loans or money from Trump’s fund to help farmers hurt by China’s tariffs. Private companies can’t get paperwork processed for initial public stock offerings because the Securities and Exchange Commission is operating with a skeletal crew. Brewers can’t get new beers approved because the Alcohol and Tobacco Tax and Trade Bureau is closed.
“The E-Verify system to check if workers are in the country legally is down. Some companies can’t ship goods overseas because they can’t get approval until the Commerce Department fully reopens. And some mortgages are on hold while the Federal Housing Administration is short-staffed.”
…”The SBA is a key funding source for small and midsize business. It guarantees about 5,000 loans a month — $25 billion a year — so small businesses can get affordable interest rates, said Tony Wilkinson, president of the National Association of Government Guaranteed Lenders. Until the SBA is operational again, lenders aren’t willing to complete the loans.
“Even if the shutdown ends soon, there will be a backlog at the SBA.
…”Economists usually ignore shutdowns, but there’s concern that the length of this one is starting to hurt business confidence. ” The Washington Post
If your small business has been affected by the shutdown, maybe this is a good time to get creative and start marketing to reach new potential clients.
Talking with a SCORE mentor for free could help you find other income sources you may have not even thought about. Click here to schedule a free mentoring session at a location near you in the Phoenix Valley. (Note: since our offices are closed, the mentors that used to meet at the office are meeting at other locations. Mentors can also mentor via Skype or the phone.)
How about Furloughed Employees?
Besides collecting unemployment, some enterprising federal workers have started small businesses. This video from PBS NewsHour tells the story of two furloughed sisters who found a sweet way to keep income coming in.
If you’re a furloughed employee, now may be the time for you to get that side-hustle going full blast or taking that hobby and turning it into a business.