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How a Government Shutdown Hurts Small Businesses

How a Shutdown Hurts SMBs
Credit: Paul Brady Photography/Shutterstock

Any time the government shuts down, the public loses access to a wide range of services. The same is true for small businesses, which often take advantage government programs intended to encourage entrepreneurship. Unfortunately, when the federal government fails to keep the lights on, small businesses suffer alongside furloughed public workers. Here's a look at what to expect any time the government shuts down.

Any small business owner hoping to get approved for a loan from the U.S. Small Business Administration (SBA) will have to wait. Processing for most SBA lending programs will be on hold when the agency's employees are on furlough.

According to the National Association of Government Guaranteed Lenders, "routine actions requiring SBA's approval cannot be processed." Lenders won't be able to submit loans into an approval queue for SBA processing, and they can't receive 7(a) loan numbers during the shutdown. Therefore, they can't approve loans under their delegated authority.

Employers looking to hire new employees during the shutdown could run into problems. One of the casualties of the shutdown is access to the federal E-verify, an internet-based system that allows businesses to determine the eligibility of their employees to work in the United States. The issue is having serious implications in states that are required to verify employees' legal status via the program before they are hired.

Additionally, Doug Monro, co-founder and CEO of the global job search engine Adzunatold The New York Times that many recruiters are holding off on their hiring plans, and many job movers are opting to wait until the government shutdown ends.

While at first it might sound like cause for celebration, no, the IRS will not stop fulfilling its duties as Uncle Sam's tax collector. The agency will not, however, be available to answer taxpayer questions about their tax liabilities. That includes small businesses. Moreover, the IRS will not issue refunds, process 1040X amended returns or conduct audits.

Operations that will continue during a shutdown include criminal law enforcement actions, processing electronic returns up to the point of refund and processing paper returns by "batching." However, don't expect any clarification on your tax questions or to receive your refund until the government shutdown ends.

Whenever the government shuts down, a legion of federal workers find themselves on furlough. That means no more lunches at nearby restaurants and no quick trips to the store on the way home. Small businesses located around federal buildings, national parks or monuments might find a drop in demand until the government shutdown ends and furloughed workers return. Nowhere is the impact greater than in Washington, D.C., where most federal employees are based.

Small businesses whose employees are planning international work may have to reschedule those trips if they are still waiting to receive their passports. While the U.S. Department of State still plans to issue passports during the shutdown, delays are expected, especially in cases where passport offices are located in federal buildings that have been closed due to the shutdown.

"The Department will continue as many normal operations as possible," the Guidance on Operations During a Lapse in Appropriations said. "Operating status and available funding will need to be monitored continuously and closely, and planning for a lapse in appropriations must be continued."

Although it could be easy to conflate government with regulation, the public services small businesses have come to rely on are apparent when they no longer function. Part of weathering the storm of a government shutdown is being prepared for the roadblocks that come with it. While there is little the average entrepreneur can do to affect policy in the nation's capital, there is plenty that can be done to keep business running as usual until Washington reopens its doors.

Adam C. Uzialko

Adam C. Uzialko, a New Jersey native, graduated from Rutgers University in 2014 with a degree in Political Science and Journalism & Media Studies. In addition to his full-time position at Business News Daily and Business.com, Adam freelances for a variety of outlets. An indispensable ally of the feline race, Adam is owned by four lovely cats.