How Will Federal Shutdown Impact Small Business Owners?

With the shutdown of the federal government put in place by Congressional lawmakers starting on October 1, many small business owners may have significant questions about what the decision means and also how it will end up affecting them. Some experts say that these entrepreneurs in particular may have reason to be upset with the move.

It’s obviously likely that the small companies most affected by the decision to shutter the government will be those which have existing contracts with federal agencies, and will now not see the money from those agreements because the agencies cannot operate and thus cannot pay, according to a report from Inc. Further, though, many other small businesses will probably feel at least some sort of pinch because many experts predict that the decision will create a potentially significant drag on the economy as a whole that lasts for months or more, even if the shutdown is resolved within a few weeks or less.

“This is an absolutely outrageous scenario enabled by inept lawmakers who are bogged down in their own private and unnecessary [interests],” Larry Miller, founder and chief executive of BNL in Lovettsville, Virginia, which provides systems engineering and program management to numerous federal agencies, told the news site. “Most of our contracts are fixed-price cost accounting standard. There is a high risk we won’t recover the cost.”

This may in turn lead to similar difficulties for small business owners’ employees, as they may have to take some unplanned – and potentially unpaid – time off from their jobs while the company has less money coming in, the report said. Other companies may have to delay the process of hiring workers they desperately need to continue their planned growth, and the already-thin margins on which many such companies operate may soon begin to grow even thinner, or even collapse back into negative territory.

How long will the implications last?
The bad news for many smaller companies is that if any of these issues that might end up impacting them could take a long time to go away, the report said. In some cases, experts on the economy are even predicting that small businesses’ prospects for growth will be restricted as long as a few years, the report said. The reason for this is that when small business owners seek additional credit – which is already significantly restricted – within the next few years they will have to submit documents which show a lack of revenues commensurate with those prior to and following the shutdown. That, in turn, could lead to questions about their profitability, as banks may be cautious to deal with enterprises that are so vulnerable to issues and government delays, which themselves seem to be growing more common these days.

“When you have a funding event, you have to talk about your history and you cannot just use the excuse of the government, because everyone knows it is harming everyone and it just ends up looking bad for entrepreneurs,” Laura Gonzalez, professor of finance and business economics at Fordham, told the site.

Consequently, it may be wise for owners to start looking into ways in which they can streamline their companies’ budgets so that they are able to better weather whatever conditions that come along in the next few weeks or more. They may be able to do so by finding more affordable small business insurance policies, including those for workers’ compensation and general liability insurance. This could potentially free up large amounts of money every that can then be devoted to other areas of need.