For the 20th time since 1976, the U.S. federal government has “shut down” after Congress failed to pass a funding bill to start the new fiscal year. Understanding how this may impact your operations is an important part of business.
Federal government shutdowns can create significant challenges for businesses, particularly those with federal contracts or relying on government services. Understanding potential impacts and preparing accordingly can help minimize disruptions to your operations.
During the 2018-2019 shutdown, construction projects in final contracting stages or early construction phases experienced delays of three to four months. That same shutdown delayed over $2 billion in loans to small businesses, while an estimated 10,000 companies with government contracts were affected.
The financial strain extends beyond federal contractors. Government contractors, unlike direct federal employees, typically do not receive back pay after shutdowns, creating cash flow challenges that can threaten business viability.
Here are some key areas to monitor and prepare for the coming days and possibly weeks:
Contract Processing and Payments: Expect delays in contract awards, invoice processing, and payment disbursements. Build cash reserves to weather potential payment interruptions.
Regulatory Services: Applications for passports, small business loans, and government benefits may face processing delays. Plan accordingly if your business depends on timely regulatory approvals.
SBA Loan Processing: Small businesses seeking financing should anticipate significant delays in SBA loan approvals during shutdowns.
Project Timelines: Federal construction and service contracts may face work stoppages. Communicate proactively with clients about potential delays beyond your control.
Smart businesses develop contingency plans including adequate cash reserves, diversified revenue streams, and clear communication protocols to navigate shutdown uncertainties successfully.
