How Government Shutdown is Affecting Small Businesses in the US
President Donald Trump’s demands for his border wall have caused the partial government shutdown from December 22. This shutdown is on the path to becoming the longest in American history. The effects are now evident and adverse. Hundreds of thousands of federal employees are going without pay and national parks are getting trashed. Moreover, TSA lines are facing logjams as more and more workers call in sick.
The shutdown has a huge impact on government agencies including Transportation, Agriculture, and Justice Departments, all of which have yet to get funds. For small businesses in the US, loans are tougher to get. Hiring just got tougher and tax refunds will not be coming soon. Below, we aim to educate you more on the effects of the government shutdown to your small business.
Small businesses in the US cannot get loans
As of December 22, 2018, the Small Business Administration (SBA) stopped processing new loans. Unfortunately, lenders will not process these loans until the government reopens. That implies that small businesses in the US cannot get the money to start or expand their companies. Even after the government reopens, it will likely take months to dig out of the backlog that has already piled up.
According to the National Association of Government Guaranteed Lenders, it is regrettable that routine actions requiring SBA’s approval cannot be processed. Currently, lenders will not be able to submit loans into an approval queue for SBA processing. In addition, lenders cannot receive loan numbers during the shutdown. Therefore, lenders cannot approve loans under their delegated authority to small businesses that may be in need.
Small businesses cannot hire new employees
Most illegal migrants will want to take advantage of the government shutdown. Arguably, this is high time for every employer to be doubly sure that employees are in this country legally. Nevertheless, the federal E-verify system is down. The E-verify is an internet-based system that allows companies to determine the eligibility of employees to work in the U.S. Because there is no way to confirm the eligibility of employees, companies and small businesses in the US cannot backfill or expand their workforce.
No help from the IRS
Even amidst the ongoing government shutdown, the IRS will not stop being the country’s tax collector. Nonetheless, the IRS will not be around to answer questions from small businesses until the shutdown is over. Many tax experts attribute this problem to the 2017 tax code that has a number of ambiguities of new rules. Small businesses will choose to file for an extension or file a special form stating why they believe they are paying the correct amount.
Moreover, the IRS may not issue refunds, process 1040X amended returns or conduct audits during the shutdown. However, operations including criminal law enforcement, processing electronic returns up to the point of refund and processing paper returns will continue unabated.
Federal employee business
Whenever the government shuts down, a section of federal workers finds themselves on unpaid leave. This implies that no more lunches at nearby restaurants or quick trips to the store on the way home. Consequently, small businesses located around federal buildings, national parks or monuments might find a drop in revenue. Perhaps, this situation may stay until the government shutdown ends and the furloughed workers return. The impact is greatly felt by small businesses in Washington, D.C., where most federal employees are based.
People cannot renew passports
For people planning international work-related travels, those trips may need to postpone until the shut down ends. During the shutdown, the U.S. Department of State expects delays in issuing new or updated passports. This is especially true in places where the passport office is inside a federal building that is shutdown. Notably, there will be processing passports but there is no guarantee it will be ready when you need it.
Niche industries face specialized impacts
Unsurprisingly, the effects of a shutdown vary from industry to industry. The effects may even come in surprising ways. For example, craft brewers will wait for the government to reopen before launching new bears. It is a requirement to get approval from the Alcohol and Tobacco Tax and Trade Bureau that is also under the shutdown. Hotels and restaurants that cater to visitors to National Parks and Monuments are taking a major hit. These locations remain closed amidst uncertainties surrounding the government shutdown. Notably, over one-fifth of home sales have stalled because federal workers cannot pay. Moreover, those companies looking at launching an Initial public offering (IPO) are deterred. That is because of the partial closure of the Securities and Exchange Commission.
Many stakeholders in small businesses in the US are highly hoping that the situation will not go into February. There has been enough suffering already. People anticipate that the Congress will intervene to either pass the Trump’s wall budget or get alternative funds. In turn, all the effects of the shutdown will end.
