No one is paying small businesses back. The federal government shutdown may be over—at least temporarily—and some government employees may get back pay—but no one is reimbursing millions of small businesses hit hard by the shutdown. They’re hurting, and they’re unlikely to recover soon, if at all. What can small businesses do to recover from this shutdown and prepare for the next time a President or Congress decides to shut down the government?
“I don’t think there is a point of recovery, and that’s the unfortunate part of this shutdown,” said Aron Schultz, event manager of Claudia’s Steakhouse in Washington, D.C.. “You can’t recover from loss of sales. You can’t encourage your guests to return and eat more food to replace the loss of sales during the shutdown or replace the happy hours that had to be cancelled during the shutdown.”
More than one in five small businesses were directly impacted by the shutdown, according to a recent survey by the HR company Paychex.
That’s a whole lot of hurt companies, their owners, and employees. The impact wasn’t just lost income. Loans, approvals, contracts—all were held up, including loans backed by the Small Business Administration (SBA), which guarantees over $30 billion in small business loans.
“When a government shutdown freezes loans already in process, it can really have devastating effects on these businesses,” said Luz Urrutia, President of Opportunity Fund of San Jose, CA, the nation’s largest nonprofit micro and small business lender. “A shutdown does real damage for a small business owner who is in the process of getting a loan to start or expand their business—and that has ripple effects for their workers, their communities, and the rest of the economy.”
“Even though the shutdown is over for now, we’re concerned about the speed with which government agencies can address the backlog of small business needs,” said John Arensmeyer, founder and CEO of Small Business Majority. “After all, this is a temporary reprieve and we don’t know how much progress can be made before the government may close again.”
It wasn’t just the SBA’s closure that damaged small businesses. Other federal agencies’ closures also did lasting damage. “One of the things that was most surprising to me as a small business owner was how the shutdown’s impact trickled down to impact businesses that, on the surface, appeared to have no connection to it or the government,” said Megan Driscoll, Founder and CEO of EvolveMKD, a marketing communications agency. “For example, we had several clients whose drug filings were seriously delayed, throwing off everything from marketing plans, hiring a sales force, and starting manufacturing. Those are private sector jobs that now will not start when they were supposed to.”
The shutdown won’t soon be forgotten by small businesses, who recognize that Trump could shut down the government again when his three-week reprieve ends.
“One of the things we could do on our end to prepare for another shutdown is just spend less by buying less alcohol or less food so we can have less waste and maintain the inventory we have so we’re not overstocked,” said Shultz of Claudia’s Steakhouse. “This is not a positive thing for us to do; we’ll have to tell our vendors we want less.”
What can small businesses do to help protect themselves if Trump or a future President decides to shut down the government?
- Diversify your customer base if possible. Yes, the federal government and its workers may generally be great customers, but they shouldn’t be your only customers.
- Create a reserve fund. Small businesses run on small profit margins, so it’s tough to put money aside. But if you can create a “rainy day” cushion, you’ll sleep better at night.
- Establish and maintain extra credit. Once again, it’s often tough to get sufficient credit to run day-to-day operations, but try to build your credit capacity with banks and credit cards. (Avoid new ‘fintech’ lenders who may charge exorbitant interest rates).
- Develop excellent relations with your vendors. In another shutdown, you may have to turn to vendors and ask for a little more time paying bills.
- Remember your pain at election time and vote. Many Senators refused to vote to re-open the Government over Trump’s objections. They didn’t stand by you—don’t stand by them.
Copyright Rhonda Abrams, 2019
This article originally ran in USA Today on January 31, 2019
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