(This article originally appeared in the Philadelphia Inquirer)
Washington is facing yet another shutdown, just as in 2019, 2018, 2013, 1996, 1995 and three other times since 1980. The reason is usually the same: haggling over the budget and how much the government is spending and unless the Senate can agree on raising the government’s debt limit — which doesn’t look too likely — the federal government will stop most of its operations.
So what does this mean for small businesses? Well, we do have some history here, and because of that, we know that there will be some companies that will be affected. For example, many small firms that do business — indirectly or directly — with the federal government will see cash flow dry up, at least temporarily.
That’s because a shutdown puts a stop to most payments due under federal contracts. So if you’re doing work directly for the federal government or you’re a subcontractor in a federally funded project, then any invoices you have coming due are going to remain open until political differences get resolved. Other small businesses that provide services such as research, consulting, delivery, transportation, technology, landscaping, and construction work to a government-owned facility or agency will also have to wait.
The areas around government facilities — The William J. Green, Jr. Federal Building on Arch Street, the Veterans Administration Center on Wissahickon Avenue or even the Edward N. Cahn Federal Building and U.S. Courthouse in Allentown — will become very quiet. Federal workers who have been allowed to return to the office will likely be forced to remain at home on furlough. Unfortunately, that means the small businesses in those areas that are selling these employees lunch, services, and other products during the workday will be out of luck for a while.
Businesses operating in certain industries will see a significant drop-off in activity, or even a complete stoppage of work. If your business serves agencies and their employees in industries like defense (Dover Air Force Base), agriculture (Pennsylvania Department of Agriculture) or tourism (The Liberty Bell), then you’ll be affected. If your business operates in an industry that is more heavily reliant on immigrant workers, then you’ll see a fall-off in available labor as the government’s processing services stop.
Small companies in need of government help will also find themselves in limbo. A government shutdown will essentially stop these types of services that the federal government provides to most firms. So if you’re waiting for a passport, an OSHA safety inspection, a decision on a federal court case, regulatory clearance on a product, a patent approval or if you need help from the Internal Revenue Service, then you’re going to be twiddling your thumbs for a while.
Finally, those waiting on certain types of capital will have to wait longer. A government shutdown would halt many of the activities currently undertaken by the Small Business Administration which means the thousands of small business loans and grants still being processed for disaster aid, COVID assistance, working capital, and longer-term financing will be significantly delayed, as well as any other assistance the SBA provides such as counselling and educational services.
So if you know that a government shutdown is likely, and it’s going to happen in a matter of days, what can you do to prepare?
The first recommendation is to get the services you’re waiting for before Friday. If you need tax assistance, a regulatory approval, advice on a project or a loan from the SBA reach out to those government agencies now before they close.
Think ahead about your travel plans. If you or your employees need a passport, then get in line before Friday. Also consider your travel plans in October and leave extra time for longer security lines and flight times caused by a potential disruption in TSA or air traffic controllers.
Double check your cash. The longest government shutdown on record was 35 days in 2018–2019. Before that it was 21 days in 1995–1996. Maybe this one will be shorter. Maybe not. But going without the cash flow from an existing customer because they’re relying on payments from the federal government could be crippling.
If you think this will impact your business,talk to your banker now, check your overhead, count up your savings and make sure you’ve lined up sources of capital that will see you through the disruption until things get resolved and payments resume.
And if history is any indication, things will get resolved. Politicians don’t want shutdowns any more than the people they serve. There’s an election coming up next year and no one in Washington wants to be remembered as being part of a political party that brought about prolonged economic harm. And when the government eventually does re-open, all of the back payments and payroll due will be made whole. But until that happens, and while the theatre in our nation’s capital plays out, it’s important that your business is prepared for the worst.