Dynamic Capital How the Government Shutdown Impacts Small Business - Dynamic Capital

On December 21st while many of us were running around trying to finish our shopping and making holiday plans, our government went into partial shutdown mode. At first, we probably thought “oh those crazy politicians are at it again”, shook our heads and thought nothing of it. But now as the shutdown stretches into day nineteen, we are seeing more and more the impact that the shutdown is having on the general population.

With nine of the fifteen departments, including the Departments of Homeland Security, Interior, Agriculture, Commerce, Treasury, Housing and Urban Development, Justice, Transportation and Housing, as well as other federal agencies, closed or running at minimum staffing, many services have been interrupted. Many national parks and museums have closed their doors, though a few have remained opened without services thanks to the help of volunteers. More than 400,000 federal employees who are considered essential are currently working without pay while another more than 300,000 employees have been furloughed, sent home without pay.

The partial government shutdown also hits small businesses hard in key areas:

  • Small Business Administration: According to their website, the site will not be actively managed during the shutdown though disaster information will continue to be available. This agency is key to the operations of many small businesses for loans, information, programs and applications assistance. The work stoppage will most likely create a major backlog in applications and approvals for this agency, leading to them needing several months to get back on track once the agency is back to normal operations.
  • IRS: While some may have been looking forward to not paying taxes during the shutdown, that is not the case. However, other IRS services have been impacted. A new business will not be able to obtain an employer identification number (EIN), tax documents needed for loan applications may not be readily available, and business owners may not be able to obtain guidance on filing their taxes. Also, with filings slated to be accepted starting January 28th, early filers are already being advised to expect delays in refund processing.
  • New Employees: Businesses use the E-Verify system to compare information provided by prospective employees on employment applications with information available through various government records for employment verification purposes. With this system currently unavailable, businesses cannot process employment applications, leading to delays in hiring.
  • Government Contracts: Many small businesses rely on contracts to provide various government agencies with goods or services to keep their doors open. These businesses have found themselves in a difficult position with unpaid invoices for services rendered or unable to operate since the entities where they usually operate (parks, museums, etc.) are currently closed.
  • Loss Revenue: Hundreds of thousands of federal employees around the country have gone a few weeks without pay. This loss of income for them translates to a loss of purchasing power. Small businesses from dry cleaners, beauty salons, and restaurants to car washing, delis and barbers usually rely on these employees’ disposable income for sales and have seen a drop in revenue due to the shutdown.

After just nineteen days, the partial government shutdown is already wreaking havoc in the lives of many Americans. A prolonged shutdown can only worsen conditions, with expected dips in the stock market, loss of funding for needy families, unpaid employees, etc. As President Trump and Congressional leaders are set to meet later today to discuss a compromise to end the shutdown, we can only watch and hope for a positive outcome from their meeting.