Small Businesses Brace for a Potential U.S. Government Shutdown
All eyes are on Washington D.C. this week, as a potential government shutdown looms. With only a few days left until government funding runs out on October 1st, House Republicans in Congress must find common ground regarding proposed cuts to the federal budget. If they don’t, many services funded by the federal government will be impacted. Some government programs, such as Social Security, will remain untouched, while others will experience interruptions in service. From delayed payments, regulatory hurdles, reduced consumer spending, and lending challenges, Main Street business will have another economic uncertainty to handle after years of rising interest rates to tame inflation and a variety of labor issues. A government shutdown will have widespread consequences, especially for the small business sector.
How a Government Shutdown Impacts Small Businesses
If Congress is unable to agree and approve a funding plan by October 1st, federal agencies will pause their operations, which will have a significant impact on small businesses. The repercussions of a government shutdown are varied and industry specific. A shutdown may cause delays in payments, regulatory approvals, awarding contracts, supply chain disruptions, financing, and more—affecting small businesses in every sector and at every stage of development.
Delays in payments because of a government shutdown can lead to cash flow problems for small businesses, making it challenging to pay employees, invest in growth opportunities, and meet financial obligations. It can also disrupt supply chains due to delays in custom inspections or closed federal agencies, making it difficult to source materials and maintain production schedules. Consumer spending is already a concern for some economists as they keep a close eye on the declining savings rate. While spending by consumers has remained strong despite rising inflation, a government shut down may further contribute to a decrease in consumer confidence and spending. The ripple effects of a government shutdown will have far-reaching consequences on small business owners and the economy as a whole.
Financing Small Business Acquisitions During a Government Shutdown
Another major impact on small businesses during a government shutdown concern lending and financing. Many small businesses rely on loans to finance their operations and growth. The suspension of loan programs from the Small Business Administration (SBA) may create financing obstacles for business owners and entrepreneurs looking to buy or sell businesses. A government shutdown can make it harder for small business owners to access the capital they need to maintain operations and create challenges for the business for sale marketplace.
For entrepreneurs looking to acquire a business and owners looking to sell their companies, a lack of access to SBA funding and loans can be eased with alternative funding options. In fact, business brokers in the most recent BizBuySell Insight Report, which tracks the health of the U.S. small business economy, reported that the economic landscape over the past few months has established an era of creative deal making. To mitigate the impact of rising interest rates on business sales negotiations, brokers and owners are developing innovative deal structures. When it comes to financing an acquisition during a potential government shutdown, buyers and sellers can rely on a combination of traditional bank loans, seller-financing, debt assumption, leverage buyouts, and more.
A potential U.S. government shutdown will have far-reaching consequences, with small businesses being particularly vulnerable. The impact extends beyond delayed payments, supply chain delays and consumer confidence, affecting financing and lending from the Small Business Administration. For business owners and entrepreneurs looking to buy or sell a business, a business broker can be a valuable asset in ensuring a successful and profitable deal during uncertain economic times. To find a broker to help facilitate a business for sale transaction, browse the BizBuySell Broker Directory.