When the U.S. government shut down for 16 full days in October 2013, it wasn’t just the 800,000-plus government employees who went without a paycheck. Thousands of small businesses across the U.S. were impacted significantly by the shutdown. Even though these businesses may not be directly linked to the government, certain aspects of the shutdown crippled productivity across the nation in extremely important parts of the American economy: small businesses.
Loans on Hold
In shutting down the government, a very important asset to the American small business was halted: the Small Business Administration loan. Businesses across the country rely on SBA loans and grants in order to get started, to expand, and to stay afloat. Due to the shutdown, any business that was expecting a loan, even if it was already approved, had to wait an indefinite period of time before that loan was received. Many businesses had to turn to alternate funding for their needs, taking on cash advances for very high interest rates (between 40% and 100%) that will have a negative effect on their finances for years to come.
The hardest-hit aspect of the Small Business Administration loan system during the shutdown was the 504 loan, which allows small businesses to purchase the real estate in which they conduct business. The slowdown of the approval process for these loans, which can also be used to purchase important equipment, caused many business to lose jobs and bids due to not having funds in place for needed equipment or real estate.
Many small businesses, especially those who specialize in construction or architecture, rely on federal funding for their day-to-day expenses. With the government shut down, this funding dried up and many companies had to lay off or reduce the hours for thousands of employees across the nation.
Even for businesses that don’t rely on government funding or small business loans, there were some major obstacles thrown in their way due to the shutdown. For example, if a business offering janitorial services had several federal buildings on its roster, those buildings would be off limits during the shutdown. The dip in revenue from this loss could have caused some employees to lose their jobs and could have even threatened the existence of the business in question. Many businesses will take years to recover from the losses suffered during the shutdown.
More Than Just the Government
So, if you thought the government shutdown only impacted federal workers who got to take a sudden two-week vacation, you’re forgetting about the thousands of small businesses that went without needed funds or had to turn to high-interest loans to obtain the equipment they needed. You’re forgetting about the hundreds of workers laid off due to dried-up funding and loss of revenue. Unfortunately, thousands of small businesses will be suffering for many years due to the 16 days they spent without government assistance.
The government shutdown wasn’t just an issue for the feds, but an issue that affected small businesses and their customers across the nation.