Government Shutdown Impacting Small Business Cash Flow

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According to a U.S. Bank study, wholly 82% of businesses that fail do so because of cash flow problems. Small businesses (defined as businesses with fewer than 500 employees) account for 99.7% of all business in the U.S.¬†Small businesses need money coming in so they can not only succeed and stay secure in the competitive marketplace, but stay afloat. There are all sorts of factors that could lead to companies having to deal with cash flow issues, including bad investments, late payments, and payroll — but those can all be corrected by competent business owners.

A government shutdown, on the other hand, is completely out of their control. A business can have the best SEO strategy in the country, but if people aren’t spending during a government or financial shutdown, it’s going to cause a litany of problems for organizations of all sizes.

According to Bethesda Magazine, the recent federal shutdown is stopping cash flow for many small businesses across the country.

“They’re dealing with their banks and having to tap into their line of credit,” said Barbara Ashe, executive vice president of the Montgomery County Chamber of Commerce. “You’re trying to hang onto cash, because you don’t have any cash coming in.”

Though small business owners are certainly experiencing cash flow problems, so are individual employees and contractors. The shutdown impacts roughly 25% of the federal government, including 800,000 employees.

“They work in places around the country,” added U.S. Sen. Chris Van Hollen, a Maryland Democrat. “But the folks who are really getting squeezed and who will never be made whole after the shutdown are a lot of these small business contractors.”

Federal contractor Chris Erickson is worried that the shutdown will burn up his vacation days, causing him to not only break into his savings account, but to postpone his wedding anniversary trip with his wife.

“It feels like contractors are forgotten in the mix,” he said. “Congress issues back pay for the government employees, and long-term contractors are ignored.”

The shutdown officially began on December 22, as government contractors across the country furloughed or worked without pay — thousands more were immediately out of work.

According to Reuters, this shutdown is the longest in U.S. history, with no end in sight. In 1995, under President Bill Clinton, a shutdown lasted a then-record 21 days.

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