The US federal government shutdown is not only hurting employees and government beneficiaries, but small businesses and entrepreneurs from around the country also are starting to feel the impact of the government shutdown. Many are losing ongoing work or less work is coming in. As the shutdown drags on, it could hurt 20% of their business, according to a survey by Thumbtack.com.
Sander Daniels, co-founder of Thumbtack.com, says the impasse in Washington is affecting small businesses and entrepreneurs in unexpected ways. Photographers, caterers and DJs have seen wedding and other high-profile events canceled because of the closure of national parks and other federal venues.
“General contractors are finding that they’re booking fewer jobs, and janitorial companies have lost contracts in federal buildings,” he adds.
Minority contracts are likely to face increasing hardships the longer the shutdown lasts, note observers. Since minority-owned firms more often tend to be sub-contracting firms to larger companies, they are more likely to experience delays in payment as prime contractors get paid first by the government.
Moreover, minority-owned businesses could experience delays in procurement certification, which is necessary in order to do business with the government. The SBA’s 8(a) program has an average certification turn around rate of four months. The closure of the SBA now means prolonged waits, six months or more.
The Washington Post reports at least three ways the shutdown is hurting small businesses and entrepreneurs:
1. SBA programs shuttered. When the government went dark, so did the Small Business Administration. Until it reopens, small business owners will not have access to some training and counseling programs, international trade services and government contracting aid. Most importantly, the closure has forced the SBA to stop processing applications for government-backed, small-business loans, leaving many employers waiting with no end in sight for the capital they need to start, expand or even save their businesses.
2. Bank loans halted. Small business owners seeking SBA-backed loans are not only affected. Many banks and other conventional lenders rely on the Internal Revenue Service to confirm income-related information for prospective borrowers, and with the agency closed, there are no federal workers to conduct those checks. While this expected to have the most severe impact on individuals seeking home mortgages, small business owners are also left waiting in a holding pattern.
3. Contractors left hanging. Every year, the federal government awards tens of billions of dollars in contracts to small firms across the country. But for those that rely heavily (or solely) on business from Uncle Sam, the shutdown is causing a temporary delay in work, late payments and possibly even cancelled contracts.
The House unanimously passed a bill to provide back-pay for federal employees on furlough during the shutdown. If the Senate approves that legislation, hundreds of thousands of public servants will be compensated for time they were forced off the job. However, there is virtually no chance of any back-pay for contractors who provide products and services to government agencies. They must bear the loss as business as usual.