Why the government shutdown is still affecting small business

The longest shutdown in U.S. history is over for now, but businesses across the country are still feeling the effects. And it’s no wonder – the Congressional Budget Office announced that the recent shutdown cost the economy roughly $11 billion, and $3 billion of that is anticipated to be unrecoverable. Atlantic Capital President & CEO Doug Williams explains, “Government shutdowns have an immediate and direct effect on government employees and contractors. They don’t get paid. The indirect, longer term effect of a government shutdown is to sap energy and confidence from consumers and businesses, which slows the pace of economic expansion.”

Unfortunately, the temporary deal that reopened the federal government on January 25thexpires this Friday, which means that the U.S. could be thrown right back into another shutdown. While businesses of all kinds may feel the pain of an extended government shutdown, small businesses are the most likely to suffer both short- and long-term damages. So, what do these extended – and potentially repeated – shutdowns mean for small business owners?

The most obvious impacts are felt by businesses who rely on government contracts or patronage from government employees, many of whom significantly decrease their spending while furloughed. Delays with the IRS present another problem for small businesses. With tax season upon us, the timing of the recent shutdown is particularly poor, and business owners can expect major delays in receiving refunds. It may also be challenging for businesses to get help from IRS employees if an issue arises with a tax filing. Even disruptions in the government employment eligibility program E-Verify can mean trouble for business owners – those who delayed hiring needed workers during the shutdown are now frantically trying to catch up.

SBA Loans – the biggest pain point

Perhaps the biggest impact of the shutdown on small business owners is delayed access to Small Business Administration (SBA) loans. The SBA guarantees more than $30 billion in small business loans each year, and millions of business owners around the country rely on SBA loans to help grow their companies.

At Atlantic Capital, we’ve seen the impact on our clients firsthand. For one client, an SBA loan delay meant having to make lease payments on an empty retail space because they couldn’t begin construction on leasehold improvements for a new store. Several others had to pay additional fees to extend contract deadlines when purchasing real estate or other businesses. “These unanticipated expenses can have a real impact on a small business’s cashflow,” said Brian Harper, SVP, SBA Banker. “They can push critical growth plans back by weeks or even months.”

Preparing for the next shutdown

With the specter of another shutdown looming, small business owners – especially those in the early stages of applying for loans or whose businesses rely heavily on government spending –have every right to be concerned. To help our clients prepare, we are operating with the anticipation that there will be yet another government shutdown come February 15th. That means we are urging our prospective borrowers to do everything needed to obtain SBA approvals before that date. If a business owner has not started the loan process but will be pursuing SBA financing, we recommend that they build contingencies into all contracts, so they won’t be penalized for closing delays.

Having a trusted advisor who can help prepare for various challenges, including the ramifications of another government shutdown, can mean all the difference for a small business. If you’d like to learn more about how Atlantic Capital can help you be ready no matter when the next shutdown occurs, please contact Brian Harper at Brian.harper@atlcapbank.comor 404-995-5826.

 

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