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Committee Sheds Light on Shutdown’s Consequences for Small Businesses

Washington, February 6, 2019
Washington, D.C.—Today, the House Small Business Committee under Chairwoman Nydia M. Velázquez (D-NY) held a hearing into the consequences of the recent 35-day government shutdown on America’s small business sector.
“As we are all aware, the recent government shutdown was a particularly painful experience that will leave a lasting impact on our small business economy and our workforce,” said Chairwoman Velázquez. “Today, our Committee heard firsthand from a flourishing brewery that had to postpone their product rollout and a small contractor who took extraordinary measures to care for her employees—all because of the government shutdown.”

Among the federal agencies ground to a halt by the shutdown, the Small Business Administration (SBA) stopped approving loans and ceased regular operations. During the shutdown, over 800,000 government workers were furloughed or worked without pay. The economic pain was also felt among federal contractors. Nearly 1.2 million government contractors across several agencies were ensnared in the shutdown. Of those workers, over 41,000 small contractors had work stalled, with a majority unable or ineligible to receive backpay.

“The shutdown affected Port City by furloughing SBA staff who were working on a loan application for a new bottling line,” said Bill Butcher, founder of Port City Brewing Company, located in Alexandria, Virginia. “Because of the closure we were unable to lock in an interest rate which could increase the cost of our loan by thousands of dollars. SBA loans are important to the small and independent brewing industry. SBA has guaranteed loans to breweries in all 50 states, DC and Puerto Rico, with more than 1,900 loans totaling $1.4 billion and supporting 20,000 jobs. I can attest firsthand the importance of those loans in providing the ability for businesses to grow, increase economic output and increase hiring in their communities.”

“The government shutdown had a measurable impact on my business, my employees, and I imagine on all small businesses delivering services or products to the federal government,” said Heidi Gerding, CEO of HeiTech Services, Inc. is a woman‐ and service disabled veteran‐owned small contracting business headquartered in Landover, Maryland. “Although some small businesses are claiming that they had little impact, I can only speculate that they don’t know the full impact to their business or understand how to calculate it and/or it is too much work for them to track.”

“The recent government shutdown had an immediate and direct effect on government workers and contractors who were not paid during the shutdown,” said Matthew D. Shapiro, Lawrence R. Klein Collegiate Professor of Economics at University of Michigan - Department of Economics. “Many households live paycheck to paycheck. An average government worker’s household has about a week’s worth of cash in their checking account at the end of a two-week pay period; roughly 20 percent have only a day’s worth of spending on hand just before their payday.”

“Small contractors are often the least informed and most affected by a shutdown,” said C.E. “Tee” Rowe, President and CEO of America’s SBDC. “When an agency faces a shutdown, procedures go into place and notices are sent out, but honestly there are more questions than answers from a small business owner’s point of view. They’re told to stop work, unless told otherwise, but no one answers the big questions – “Will my contract come back? Will I be paid and when? What about my employees? A large contractor can shift employees to other work, disruptions can be sorted out and overhead absorbed to handle the lapses. For a small business, everyone is out of luck.”

“Unfortunately, the stories we heard today of the lasting pain inflicted by the shutdown mirror countless others on Main Streets in every corner of America,” said Chairwoman Velázquez. “We must shed light on these struggles while committing to working together to prevent another devastating shutdown in the future.”

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