Early Saturday morning, the federal government shut down after Democrats and Republicans in the Senate failed to reach an agreement that would keep the government funded. How is the shutdown likely to affect you if you’re an entrepreneur or small business owner?
It depends. If the shutdown is very brief, it may not affect anyone much at all. If it goes on for several weeks or longer, it will likely affect all of us, at least to some degree. Some experts predict that this shutdown may last a while because there is little bipartisan agreement on Deferred Action for Childhood Arrivals (DACA), an Obama-era program canceled by President Donald Trump, that allowed some illegal immigrants who entered the U.S. as children to get deferments on deportation and work permits. The longest shutdown so far, which began in December 1995, lasted one month and a day.
Here are some reasons the shutdown could affect your small business:
1. Your biggest customers are the federal government and/or government contractors.
Many federal programs defined as nonessential have been suspended completely. If you’re a government contractor, or you work for government contractors, you likely already know whether the programs you work with have shut down or not. If not, here’s some information about which programs are and aren’t staying open.
2. Your customers are military personnel.
The military, obviously, is an essential service that will remain operational. However, in a shutdown, military personnel cannot receive their pay. Congress can override that with a vote to give them an exemption, and it may. But if that doesn’t happen and your business is, say, a restaurant near a military base, you may find you have fewer customers until the shutdown is resolved.
3. Your customers are federal employees.
More than 800,000 federal government employees all over this nation stand to be furloughed and have their pay suspended. As with military personnel, if they make up a significant portion of your customers, you will likely see business fall off during the shutdown. On the other hand, unlike military personnel, they’ll find themselves with a lot of free time on their hands, so if you own a bar or a miniature golf course or something like that near a federal government office, you may find business is up.
4. Your business depends on tourism to a national landmark.
During the 1995 shutdown, I drove the through the village of Hyde Park, New York every day. Hyde Park hosts the Roosevelt and Vanderbilt mansions, popular tourist attractions that were operated by the federal government and thus were closed. I talked to nearby small businesses such as hotels and convenience stores. During that month, they were hurting.
5. You need a passport, visa, or gun permit.
All these things will be on hold until the shutdown is over.
6. You’ve applied for a Small Business Administration loan.
You’ll be stuck waiting for an answer, or for your loan to finish processing, while the shutdown is on.
7. You’ve filed (or are planning to file) your taxes early so as to get a quick refund.
You guessed it: processing taxes and sending out refunds is a non-essential service. According to one expert source, expect refunds to go out as planned if the shutdown lasts less than 10 days. That would mean refund payments, which usually start going out in mid-February, would be delayed.
8. You’re applying for an IPO.
Twitter’s IPO was reportedly delayed due to the brief 2013 shutdown. If you’re lucky enough to have started a business that’s ready to go public, the government shutdown may mean putting your plans on hold for a little while.
9. You’re affected by the state of the economy.
That’s all of us, of course. One measure of the shutdown’s effect is the stock market, which has already reacted mildly to the prospect of a shutdown with a small decline from its record highs. When the markets closed Friday afternoon, the government was still open for business and politicians were still hoping to resolve their differences before the midnight deadline, so we may not see the full effect until next week.
In general, the stock market tends to dip after a shutdown but that dip may not last once the government opens again. Beyond the stock market, analysts say that because of lost activity during a shutdown, the U.S. economy overall may slow down for a bit. And some analysts say that even the threat of the current shutdown was enough to weaken the dollar against some other currencies. A weak dollar could be bad news or good news for you, depending on the nature of your business. That too will likely bounce back once the shutdown is over.