When the federal government shuts down, even far outside Washington, D.C., small business suffers. Government contractors lose money (nearly 25% of whom are small businesses), the SBA stops processing loans, tourism takes a hit (national parks and monuments close), and more.
Unlike federal employees who receive back pay when they return to work, America’s small business owners are on their own when it comes to recovering costs, accessing much-needed financing, and in many cases, re-building their businesses.
In this article, the second in a two-part series on government shutdowns and their effect on small business (catch up on part one here), we take a look at how business owners can prepare for a potential shutdown and mitigate the impact.
Here’s what you need to know to prepare for and mitigate the impact of government shutdowns on your business.
If You’re a Government Contractor
Contractors who depend on federal government business are perhaps the hardest hit by shutdowns. But there are some steps they can take to prepare and recover once Uncle Sam gets back to work. Below are a few questions to ask and best practices to pursue:
Can you continue to work on a contract?
If you’re working on a government contract, find out how any imminent shutdown may affect the job. Will a “stop work” order be issued by the agency? If so, all work must cease. Whatever happens, do not stop working until you receive an explicit notification to stop work from the agency.
Get organized, fast
Even if a stop work order isn’t issued, contractors face another challenge – access to resources. A shutdown means that agency personnel are furloughed, facilities are closed, and access to data is denied, making any continuation of work impossible. Try to prepare for this eventuality by getting as much information about the project as you can before government employees are furloughed. This is also the time to chase and resolve any unpaid bills.
Request a contract extension
In the event of a shutdown, you may be entitled to an excusable delay which extends the contract until the work is performed, if one isn’t forthcoming, press for one.
The next big question is whether you’ll get paid. There’s no clear answer here. It all depends on the type of contract (fixed price or cost reimbursement), what type of work is being performed, and where the money’s coming from. If you’ve received a stop work order, refer to your contract. Is there an option to recover any lost costs for fixed-price contracts or those that have already been funded? Get in touch with your procurement contracting officer to find out what’s involved. If you struggle financially during a shutdown, consider invoice financing. Fundbox lets you draw funds based on your outstanding accounts receivables, register in seconds and get access to cash as early as the next business day.
Consult with a lawyer
Since the threat of shutdowns seems to have become a part of contracting life, it’s a good idea to consult with legal counsel who specializes in federal procurement law to understand your rights.
Keep a paper trail
Whatever happens, keep stringent records of costs incurred because of the shutdown and document all communications you’ve had with the government so you can support any case you make to recover costs.
If You’re Applying for an SBA Loan
The SBA closes its doors completely during a shutdown, delaying the processing of hundreds if not thousands of SBA loan applications. Shutdowns are unpredictable: they may last days or weeks.
You might not have that long to wait. If you need financing faster, consider alternative options like Fundbox. We offer financing without the lengthy wait, paperwork, and look beyond your credit score to help you get funding decisions. Check out Fundbox Credit™, and see for yourself.
If You’re in the Tourism Business
Shutdowns can have a devastating effect on tourism, particularly for small businesses located in or near national parks and monuments.
If you own a business that relies on tourist, what are your options during a shutdown?
Before a shutdown, think about how you can appeal to customers to keep their travel plans. Hotels and B&Bs can offer “shutdown specials” during a closure and “back in business” incentives post-shutdown. Others may be able to diversify or suggest other sightseeing alternatives that don’t involve affected parks.
Make a point of communicating regularly with your customers. Let them know how, and if, the shutdown will affect your business, what you’re offering instead, and give them a reason to come back when it’s all over.
Keep an eye on your cash flow forecast, and be prepared to mitigate any potential impacts.
If Military Personnel are Your Customers
Is your business close to a military base or located within a base? If DoD employees are furloughed, this could have a knock-on effect on the money they spend with your business. Show that you are with them, offer promotions or other incentives to drive foot traffic. Many bases don’t let you advertise on-site, so you need to rely on word-of-mouth.
Depending on your business, and if it makes financial sense, you might also consider offering services for free or at a discount during the shutdown, then recoup it later when retroactive pay kicks in.
If You’re Hiring
E-Verify, the federal government’s employment eligibility verification system stops working during a shutdown. Even if the system is down, employers must still complete Form I-9 for all new hires. However, you won’t be able to create a case in the E-Verify system (which you’re required to do within three days of the employee starting work).
During recent shutdowns, USCIS suspended this three-day rule, but employers are required to submit I-9s once the system comes back online.
Keep good records of new hires made during a shutdown and find out what the time frame is to enter and create cases in the system once the shutdown ends.