While Congress works to put a continuing resolution together to keep the U.S. government funded, a government shutdown has any number implications for small business owners. Starting October 1, 2023, major industries and the economy-at-large may be disrupted by a shutdown from Washington, with 91% of small business owners indicating a shutdown would significantly impact their bottom line.
The U.S. small business employs half of all U.S. private sector workers, but is historically the first to cut costs and staff during a downturn. This was the case during a global pandemic and has been the case for prior government shutdowns. Likewise, access to capital for SMBs will become tighter, as the Small Business Administration (SBA) will stop approving and processing new loans for 7(a) and microloan programs.
Main Street may also be challenged by the gridlock that could occur when “non-essential” federal agencies or employees aren’t working. For instance, regulatory federal offices that provide certifications and approvals for small businesses will be impacted by a government shutdown. For business owners who filed a tax extension, a partial IRS closure heading into October 15th could be challenging. Likewise, countless individuals may be frustrated by process interruptions as their student loans are called due.
Still, if small business owners have learned anything in the past few years, it’s how to navigate uncertain economic times. While a government shutdown isn’t unprecedented, there are some best practices for any operator to weather the storm.
What Should A Small Business Do During a Government Shutdown:
1. Collect on Outstanding Invoices:
- Prioritize chasing overdue payments from clients to improve your cash flow and financial stability.
2. Reduce Overhead Costs:
- Identify and cut unnecessary expenses within your business operations to free up funds for essential needs.
3. Automate Time-Consuming Tasks:
- Streamline your business operations by automating repetitive tasks using cost-effective or free technology platforms. This can save you time and resources.
4. Outsource for Extra Efficiency:
- Consider outsourcing certain tasks or functions to reduce operational costs. Outsourcing can provide access to specialized expertise without the overhead of hiring full-time employees.
5. Build a Cash Reserve:
- Regularly set aside a portion of your income to establish a financial safety net. This reserve can be invaluable during challenging times, providing a buffer against unexpected financial setbacks.
6. Communicate with Vendors:
- If you're facing difficulties in paying your bills, open lines of communication with your vendors. Negotiate payment plans when necessary to ease financial burdens. Conversely, explore options to make payments more convenient if your vendors are experiencing financial challenges.
7. Stay Optimistic:
- Maintain a positive outlook and adapt to challenging situations. Small business owners are known for their resilience and ability to navigate uncertainty. Optimism, coupled with prudent financial management, can help you weather economic fluctuations. “Small business owners are nimble and savvy,” says Raj Tulshan, founder of Loan Mantra. “They have weathered a global pandemic and they will weather political uncertainty. At the end of the day, though, I am optimistic that the capital markets indicate the possibility for a resolution.”
Remember that financial preparedness and open communication with clients, vendors, and employees can help small businesses weather the impact of a government shutdown or other economic challenges. Staying proactive and flexible in your approach is key to resilience in uncertain times.