3 Ways Your Small Business Can Suffer From a Government Shutdown

Updated on January 31, 2020
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U.S. citizens—small business owners included—should keep their trusted news sources in constant refresh until this Friday night.


With the bill to fund the government set to expire—and a hot debate on what should go into 2017’s remaining government budget—the government could shut down Friday at 12:01 a.m. if Congress can’t come to agreement on funding legislation.

Government shutdowns aren’t good for anyone—small business owners included.

What happens if Congress and President Donald Trump can’t find a resolution, and the government closes its doors? How could it affect your business?

Here’s what you need to know.

Why the Disagreement on the Funding Bill?

Under regular circumstances—when all parties are in agreement—Congress passes a new spending bill that the president then signs into law by the deadline.

However, this year’s budget legislation won’t be instated so easily.

That’s because, in his last few days to deliver on one of his campaign promises during his first 100 days in the White House, Trump requested that funding to build the wall along the border of Mexico be included in the spending bill.

The president’s recent demand comes in conflict with his campaign promise that American taxpayers will not pay for the wall and that Mexico will. However, it is now clear that U.S. taxpayers would need to bear the majority of the cost of the border wall.

According to the New York Times’ The Daily, a few Congressional Republicans will support Trump’s wall proposal—just not in this 2017 funding proposal. Democrats required to pass the legislation will, however, not support the construction of the border wall—especially not in this 2017 budget proposal. (And even some Republicans—particularly those representing the U.S.’s border states—say they will never support U.S. funding toward the border wall.)

And with disagreement between Republicans and Democrats on 2017’s budget—and uncertainty whether or not Trump will pass the proposed bill without his border wall funding by Friday night—there’s a real threat that the government will shut down at the stroke of midnight.

What Happens in the U.S. When the Government Shuts Down?

The term “government shutdown” paints a pretty accurate picture of what actually happens during a government shutdown.

Put simply, the government will run out of money from its previous spending budget, forcing government initiatives and agencies to stop operating.

Government employees whose roles are deemed “essential” will keep working—this means any government position pertaining to national security will remain functioning.

However, key government operations that affect U.S. citizens’ daily lives will stop, like:

  • U.S. postal services
  • National park operations
  • Tax refund distributions
  • Passport issuance
  • Public school food distribution (if the government is shut down for long enough)
  • Federal court operation (if the government is closed for more than 10 days)

While you might think that you can live without a few of these government functions for a few days, government shutdowns can last a while—and cost Americans a lot of money.

For instance, the 16-day government shutdown in 2013 cost U.S. taxpayers $2 billion in lost productivity.

And for small business owners, a government shutdown can have more serious implications than just a few days of missed mail.

How Will Small Business Owners Be Affected?

Small business owners were seriously affected by the 2013 government shutdown. Some were even close to closing their doors themselves during the 16-day period, according to the New York Times’ The Daily.

How exactly might a small business owner be affected by a government shutdown this time around?

Well, businesses both big and small contract with the government. And with no government funding—or government employees in their positions, for that matter—there’s no money or workforce to fulfill payments for those businesses.

Or, if you need government business funding to keep up and running, you won’t be able to secure any business loans from the U.S. Small Business Administration. You’d have to wait around for the government to reopen—and some small business owners don’t have the time to sit around and wait.

And finally, your business might feel the long-term impacts of the financial burden of a government shutdown. With tourism areas shut down and many federal workers out of jobs—not receiving paychecks—spending would inevitably halt in local economies. And when local residents and visitors aren’t spending money, local small businesses lose out.

All in, a government shutdown isn’t something anyone should take lightly, let alone small business owners.

Will There Be a Government Shutdown in the End?

No one wants the government to shut down—not Trump, Republicans, or Democrats. If 2013’s shutdown is any lesson, a government shutdown will result in a loss of money, productivity, and key government services.

And after a government shutdown, U.S. citizens and politicians alike will look to point fingers at a responsible party. Republicans took the brunt of the responsibility for the 2013 government shutdown, and they don’t want to be blamed again.

With the main source of the standoff coming from Trump’s demand for funding for the wall, the president also risks being blamed for the shutdown.

In recent news, Trump has backed off from his request that funding for the border wall be included in the spending budget (although he insists that the wall will be built). This will help cool off the debate on what should be included in the budget, and Congressional Republicans and Democrats should come into agreement on a bill by Friday.

Without pressure from Trump, there’s less threat of a government shutdown. However, Republicans and Democrats still need to come to agreement on key government spending issues, so stay tuned for updates until Friday!

Georgia McIntyre

Georgia McIntyre is the director of content marketing at Fundera. She has written extensively about small business finance, specializing in business lending, credit cards, and accounting solutions. Georgia has a bachelor's degree in economics from Colgate University. Email: georgia@fundera.com.
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