5 Ways the Government Shutdown Impacts Small Businesses (and What to Do About It)

The government shutdown has already started to hit small businesses across the country. SBA loans are on hold. Federal contracts are delayed. Local cash flow is tightening. For many business owners, this feels like one more thing they didn’t plan for. If you need steady guidance, a small business coach can help you make clear moves, even when the news changes by the hour. As a small business coach, I’ve seen what happens when uncertainty like this hits. The good news: you can still control more than you think. Here are five ways the 2025 government shutdown impacts small businesses and what to do about it. 1. The Immediate Financial Shock to Small Businesses When the federal government closes, small businesses feel it first. Many depend on SBA-backed loans or federal contracts to stay stable. Those loans stop when agencies shut down. Local banks may hesitate to fund new projects. The SBA confirmed that their regular lending activity pauses during shutdowns, creating a ripple that affects Main Street faster than Wall Street. Owners tell me the first hit is confidence. Sales calls get slower. Partners stall decisions. Even small delays stack up. Payroll still runs, rent still hits, and inventory still costs money. You can’t wait around for normal to return. You need a short list of actions, and you need them now. Set a weekly cash report. Keep a rolling 13-week cash forecast in a simple sheet. Track inflows, outflows, and timing. Share a tight budget with your managers. Pick two costs you can pause for 30 days. Call your landlord and ask for a short deferral or a partial payment schedule. Most will work with you if you ask early and show a plan. How the Small Business Lending Freeze Hurts Growth The SBA reported that lending approvals through programs like 7(a) and 504 freeze completely. That means thousands of owners waiting for funds to buy equipment, open locations, or hire staff are left stuck. The delay isn’t weeks; it can stretch into months. Even after government operations resume, backlogs pile up. Treat your pending loan like money you may not see for a while. Build a plan B and a plan C. Consider smaller, staged projects that you can fund with current cash. Scale a buildout into two phases. Push non-critical hires by 60 to 90 days. Ask vendors for net-45 or net-60 terms to bridge the gap. Keep all documentation clean, since lenders move faster when your financials are organized and current. Short-Term Cash Flow Tactics to Stay Afloat Use what you have and tighten what you can. Collect unpaid invoices quickly. Call first, then email. Offer a small early-pay discount if needed. Delay non-essential purchases. Rent, payroll, and taxes come first. Pay close attention to your breakeven number each week. Move slow sellers with a simple promotion that turns stock into cash. Shift ad spend toward offers that convert within seven days. I tell clients: if you can keep 90 days of operating cash, you’re in a better position than most. Focus on staying liquid, not perfect. Survival gives you time, and time gives you options. 2. Federal Contract Delays and Missed Opportunities Businesses that serve government agencies face more than just delayed payments. Entire projects pause. Some never restart. The WSFS Bank report explained that shutdowns disrupt everything from building maintenance to IT and construction work. If you depend on that work, prepare for a slower pipeline. Bid cycles get pushed. Award dates slip. Change orders sit in review. Subcontractors carry costs with no billing path. That squeeze can break a margin-thin project. You need a wider base of revenue so one stalled contract does not pull the whole year down. Run a simple exposure check. List current federal jobs, expected billings, payment status, and remaining costs. Tag each project red, yellow, or green. Red means stop new spend. Yellow means hold any add-ons. Green means proceed with caution. This snapshot gives you clarity for the next 60 days. Why Federal Contracts Matter More Than You Think For small contractors, a single federal contract can be the difference between steady revenue and a bad quarter. When agencies pause projects, payments stop too. Even subcontractors down the line get squeezed. That money matters in local economies, where it trickles to suppliers, employees, and communities. Map out your top three buyers by share of revenue. If any single buyer sits over 25 percent, start a plan to bring that under 20 percent within six months. Small shifts help. One new maintenance contract. A modest service bundle for local municipalities. A retainer with a private client. Spread the risk so one freeze does not stall everything. Contingency Planning for Contract-Dependent Businesses If you rely on federal work, diversify. Don’t wait for agencies to reopen. Pursue city and state contracts that continue during federal pauses. Offer a slimmed service package to mid-market private clients. Pre-build a proposal library so you can respond fas