How a Government Shutdown Affects Small Business

By Stefano Tromba
January 23, 2019

There’s absolutely nothing to like about a government shutdown but in recent years (and in the last few administrations), we’ve unfortunately seen them occur. But aside from the public loss of a wide range of services, and federal jobs, many don’t realize how it impacts small business. So, here’s a breakdown of how small business is affected by the shutdown and ways to avoid the sting.


Many new businesses take advantage of government-funded programs designed to encourage entrepreneurship. Unfortunately, when the federal government itself fails to pay its own bills, small businesses suffer as well. That means federally funded loans, intended to help companies are not available.

Fortunately, there are companies that offer to fund small businesses. Depending on the amount requested, they can even receive same-day approval. We at Fingercheck for example, offer such a service – with no underwriting required for amounts of up to $5K – providing certain requirements. This can be a valuable resource for many companies in need of a financial boost.

Hiring Freeze

The heavily visited federal E-verify website, that allows businesses to determine the eligibility of employees to work in the US, is also a casualty of the government shutdown. Companies seeking to verify employees’ legal status before they’re hired to suffer since they must verify legal status prior to hiring. Also, many recruiters put off hiring plans while those looking to switch jobs typically wait to do so until the shutdown ends.

Federal Employee Businesses

Furloughed federal employees are always first and hardest hit with the gut-punch of a government shutdown. With it, restaurants and other eateries located near the federal building, experience a major drop in lunchtime cover that they desperately rely on. In fact, all small businesses located near federal buildings, including national parks, tourist shops, and monuments feel the effect.

IRS Scale Down

No, the IRS doesn’t completely shut down along with the government, but it is limited in certain ways. The agency won’t have the ability to answer taxpayer questions on tax liabilities. This includes, you guessed it, small businesses. It also won’t issue refunds, amend returns or process 1040X. But on a positive, they don’t conduct audits during this period.

A Change Will Do You Good

Sure, there’s no upside to a shutdown – but it does force small business owners to get creative and look to ways to do business differently. One would be to entertain a more modern, cost-effective way to run a business.  More and smaller companies are turning to automation to save money and time.  Automating things that were once considered high time consuming like, running payroll and HR management can now be performed automatically and way more efficiently. Hopefully, the current shutdown doesn’t last much longer but it should make business owners re-evaluate the way they do business – even when the government isn’t.

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