Key Takeaways
- A government shutdown occurs when congress cannot pass legislation for federal agency funding
- During this time, SBA loans cease being processed
- Submit your loan application anyway and stay responsive with your loan service provider so you’re first in line once processing resumes
Each year, the U.S. Congress votes on a federal government spending bill.
When elected officials in Congress cannot come to an agreement on the budget for the next year, funding lapses and the federal government is forced into a shutdown until a funding bill can be successfully passed, or Congress can agree on temporary funding.
When the federal government shuts down, the ripple effects are felt across the country and throughout the economy in different ways.
The government shutdown in December of 2018 – January 2019 lasted 5 weeks and resulted in a reduced economic output estimated at $11 billion that was never regained.
When elected officials in Congress cannot come to an agreement on the budget for the next year, funding lapses and the federal government is forced into a shutdown until a funding bill can be successfully passed, or Congress can agree on temporary funding.
When the federal government shuts down, the ripple effects are felt across the country and throughout the economy in different ways.
The government shutdown in December of 2018 – January 2019 lasted 5 weeks and resulted in a reduced economic output estimated at $11 billion that was never regained.
How Does a Government Shutdown Affect Small Businesses?
Federal shutdowns can affect small businesses in a few different ways.
1. SBA Funding
When the U.S. Federal government shuts down, the SBA shuts down.
When the SBA is not in operation, new SBA loan applications cannot be funded. Even if your application had already been submitted and in progress prior to the government shutting down, that progress comes to a halt until the government reopens.
The government shutdown in October 2025 was the longest U.S Federal Government shutdown to date and blocked an estimated 10,000 businesses from receiving $5.3 billion of SBA funding.
When the SBA is not in operation, new SBA loan applications cannot be funded. Even if your application had already been submitted and in progress prior to the government shutting down, that progress comes to a halt until the government reopens.
The government shutdown in October 2025 was the longest U.S Federal Government shutdown to date and blocked an estimated 10,000 businesses from receiving $5.3 billion of SBA funding.
2. Loss of Government Contracts and Permits
If your business has any existing contracts with federal government agencies, payments will likely be delayed, and contracts could be cancelled entirely.
3. Slowed Business
Because a federal government shutdown’s effects are so far-reaching, many facets of the U.S. economy are affected. You can anticipate business slowing down for the duration of the shutdown and briefly after the shutdown ends.
Shutdowns mean hundreds of thousands of federal employees going without pay. Further, other consumers may err on the side of frugality in the midst of economic uncertainty.
Shutdowns mean hundreds of thousands of federal employees going without pay. Further, other consumers may err on the side of frugality in the midst of economic uncertainty.
4. Supply Chain and Administrative Delays
With halted federal activity comes delays in federal permitting, customs operations, import/export operations, and more.
For small business owners, these delays manifest as slower inventory restocking, project delays, and loss of sales to out-of-stock items.
For small business owners, these delays manifest as slower inventory restocking, project delays, and loss of sales to out-of-stock items.
How Can You Prepare For A Potential Shutdown?
When the U.S. is being warned of a potential government shutdown, there are a few ways small business owners can prepare for these delays and drawbacks.
1. Build a Financial Cushion
Regardless of an impending shutdown, you should always have a 3-6 month financial cushion saved up in case of emergency or slow seasons. If you don’t already have this money in savings, it’s never too late to start building it up.
The longest U.S Federal Government shutdown in history lasted 43 days. Having a savings of at least 3 months worth of regular expenses would be enough to help you through a shutdown and then some as revenue gradually picks back up.
The longest U.S Federal Government shutdown in history lasted 43 days. Having a savings of at least 3 months worth of regular expenses would be enough to help you through a shutdown and then some as revenue gradually picks back up.
2. Apply For Funding ASAP
Keep an eye on budget deadlines and the opinions of political experts. If a shutdown seems imminent, consider applying for an SBA loan sooner rather than later.
Getting your hands on SBA funding prior to a shutdown not only helps plump your cash flow in the midst of economic uncertainty but also helps finance your small business projects and expansion even while the SBA operations are halted.
At NEWITY, our team facilitates SBA loans 3x faster than the national average, ensuring you get your hands on the small business capital you need when you need it.
To further speed up this process, prepare to have the necessary financial documentation organized and ready to submit.
Getting your hands on SBA funding prior to a shutdown not only helps plump your cash flow in the midst of economic uncertainty but also helps finance your small business projects and expansion even while the SBA operations are halted.
At NEWITY, our team facilitates SBA loans 3x faster than the national average, ensuring you get your hands on the small business capital you need when you need it.
To further speed up this process, prepare to have the necessary financial documentation organized and ready to submit.
3. Diversify Revenue Streams
It is not advisable to rely on one major source for a large portion of your revenue.
Especially if that source is directly or indirectly affected by federal government operations, consider ways you can expand your income to include more sources.
Initiate new contracts, invest in diversified marketing tactics, and start catering to different demographics.
Especially if that source is directly or indirectly affected by federal government operations, consider ways you can expand your income to include more sources.
Initiate new contracts, invest in diversified marketing tactics, and start catering to different demographics.
Over the past 50 years, the U.S. Federal Government has shutdown 22 times.
The best way small business owners can protect their businesses against any potential setbacks is to stay informed and prepared.
If you have any questions or concerns about how a shutdown could affect your SBA loan application, our team at NEWITY is ready to help.
Interested in finding out how much you could qualify for in financing through an SBA 7(a) loan? Apply now and find out in 10 minutes or less.
The best way small business owners can protect their businesses against any potential setbacks is to stay informed and prepared.
If you have any questions or concerns about how a shutdown could affect your SBA loan application, our team at NEWITY is ready to help.
Interested in finding out how much you could qualify for in financing through an SBA 7(a) loan? Apply now and find out in 10 minutes or less.
Find out how much you could qualify for
