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Small-Business Owners Shaken by Government Shutdown

The trickle-down effect to those relying on SBA loans to tourism operators.

by
Rodrigo Sermeño

Bio

October 18, 2013 - 11:30 pm

WASHINGTON – The 16-day government shutdown’s impact on small business has been “substantial,” a group of small-business owners told the Senate a day before Congress reached an 11th-hour deal on Wednesday to reopen the government and raise the debt ceiling.

Sen. Mary Landrieu (D-La.), chair of the Senate Small Business and Entrepreneurship Committee, convened a panel of small-business owners Tuesday to discuss the impact of the government shutdown on their companies.

The message from every entrepreneur in attendance was the same: the government shutdown had paralyzed their businesses.

“We’re now on Day 15 of a government shutdown, and unfortunately, we’re only two days away of the possibility of the United States signaling to the world that we will not pay our bills,” Landrieu said. She added that the stalemate in Congress, caused by “a small minority from one party” who has decided to “hold the global economy hostage,” was stopping a lot of economic activity in the nation.

A group of small employers representing various sectors, including technology, manufacturing, and tourism, explained to the committee how their companies have been affected by the shutdown.

Chris Leh, president of TL Technologies, told the committee his company was in the process of securing a Small Business Administration (SBA) loan, but missed the window when the government shut down. He said his company, which manufactures small metal parts, had to cancel plans to buy new equipment and had to rescind offers of employment.

“We cannot proceed with the purchasing of our equipment, we had to stop about $600,000 dollars worth of equipment from moving, we idled riggers, electricians and employees,” he said. “We are completely and absolutely in a stall mode at this point.”

Keith Griffall, whose firm operates group travel tours across the western United States, noted the tourism industry has had a difficult decade because of the several natural disasters and the economic recession, and only until recently had businesses started to turn the corner.

“People had confidence. They began to spend their money on travel again,” he said. “And now we have the government shutdown of 2013, which is just one more devastating blow to the small businesses, not just in the western United States, but certainly throughout America.”

It is not just the tour-operating companies, Griffall said, but other businesses have all been hit hard by the closure of the nation’s 59 national parks.

“There are thousands of small businesses that are related to the tourism industry. It is an industry, which is populated mostly by small and very small businesses. And as a tour operator, we use these businesses on every program we operate, everything from hotels, attractions, motels, gift shops, and restaurants,” he said.

The National Tour Association (NTA) has estimated the shutdown cost tourism firms around $152 million per day. According to an NTA survey, 82 percent of respondents said their businesses have been affected by the government shutdown.

“These effects are dramatic, immediate, and unrecoverable, but more importantly, this type of man-made crisis creates immediate effects for small business and all their employees, and it creates long-term effects that can further depress the travel market going into the future,” Griffall said.

The U.S. Export-Import Bank and the SBA were closed as part of the government shutdown. That means the nation’s small businesses could not get a loan from these institutions.

Last year, the SBA approved 53,000 loans, providing through its flagship 7a and 504 loan programs $30.2 billion in loans to small businesses. If these numbers hold, an average of 150 loans or $93 million were not being processed every day the government shutdown continued, Landrieu said.

“Eighty-eight percent of the Export-Import Bank transactions were from small businesses totaling $6.1 billion. Translate that to $16.7 million a day of lost transactions for small businesses all over America,” she added.

Chuck Withee, president of The Provident Bank, said the SBA’s 7a and 504 loan programs are the “backbone” of his company, which offers loans to small businesses and employs 130 people. He said shuttering the SBA crippled many of these small firms who live “day to day,” often wondering how “they’re gonna keep the lights on.”

Sally Robertson, whose company provides SBA 504 loans to small businesses, pointed out many of the ways in which the SBA closure will affect companies. For instance, she said, many firms entering into contracts to buy fixed assets could lose their deposits if they are unable to meet settlement deadlines because they do not have financing secured.

“The conversation has been going on for months about the shutdown and the debt ceiling. CEOs have been taking that into account for months. They have been making quiet cutbacks, layoffs, and furloughs,” she said. “Our economy has been suffering for months. Our lending activity is down 30 percent from last year.”

Ronald Paul, chairman of Eagle Bancorp Inc., said the trickle-down effect of the shutdown is yet to hit the economy, and the economic recovery will be devastated if Congress continues “kicking the can down the road” by reaching a temporary agreement that delays resolving the country’s fiscal problems.

“What’s gonna happen between now and February, I think, is gonna be equally as ugly as what’s happened over the past couple weeks,” he said.

A Gallup poll released Oct. 4 showed consumer confidence had dropped to its lowest since December 2011 and the Standard and Poor’s (S&P) 500 Index was almost at a one-month low on Oct. 8, but has rebounded since then as lawmakers proceeded to negotiate a deal to end the government shutdown.

(Thumbnail on PJM homepage based on a modified Shutterstock.com image.)

Rodrigo is a freelance writer living in Washington, D.C.

Comments are closed.

Top Rated Comments   
Obama made the decisions to close down these programs and parks that hurt small businesses, all to keep Obamacare, another industry destroying government program. Go blame him. And if you think 11 days of lost SBA loans hurts the economy, wait until people are dinged an extra 12k a year for their new "affordable" healthcare that they can no longer spend on other things, like houses and cars and appliances.

And there is no economic recovery happening. That's another lie.
49 weeks ago
49 weeks ago Link To Comment
More political theater from the Democrats. Note they don't hold Obama responsible for shutting the parks, especially the parks that didn't need to be shut. And if you rely on gov't for your cheese, you are at their whim. SO don't be surprised when you get caught up in it.
49 weeks ago
49 weeks ago Link To Comment
So, you relied on the FedGov for support, a FedGov headed by that thug Obama, and you are screwed by the shutdown? Well, what the heck did you expect?
49 weeks ago
49 weeks ago Link To Comment
All Comments   (13)
All Comments   (13)
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my best friend's step-aunt makes $68/hr on the internet. She has been fired for 8 months but last month her pay was $16664 just working on the internet for a few hours. read this post here....www.Bay95.com
49 weeks ago
49 weeks ago Link To Comment
my roomate's sister-in-law makes $75 every hour on the laptop. She has been out of work for 6 months but last month her paycheck was $20467 just working on the laptop for a few hours. >>>>>>>> http://xurl.es/7nkyz
49 weeks ago
49 weeks ago Link To Comment
my best friend's ex-wife makes $85/hour on the internet. She has been fired from work for ten months but last month her check was $12227 just working on the internet for a few hours. More Help.....WWW.Rush64.COM
49 weeks ago
49 weeks ago Link To Comment
Locally a woman was complaining that her mortgage business was dried up because of the 'shutdown'. My response to her was the same as my response to people who seek SBA loans; if the Federal government didn't have its tentacles wrapped around every aspect of our financial services (in addition to every OTHER aspect of our lives) your businesses would not be affected by a bunch of worthless politicians having a spat. WHY have we allowed the government to control so much? Why depend on them for your livelihood? And what the heck will happen once you depend on them for your medical care? What will you do when the Feds close the hospitals because they're fighting about their power and their budget?
49 weeks ago
49 weeks ago Link To Comment
These people are no friends of small business. They are working as hard as they can to impose State Capitalism. They are concentrating capital in fewer hands. Of course they view the SBA as nonessential, just as do they view the small business owners.
49 weeks ago
49 weeks ago Link To Comment
Mary Landrieu? Would that be the same Mary Landrieu who was talking partisan garbage the Saturday before Katrina hit, instead of using TV time to urge the people to evacuate? In a sane world she would have been kicked out of politics after Katrina.

Now her guy in the White House hand picks who should be hurt by the shutdown, and she finds the victims to parade before a committee. Excuse me while I don't shed tears.
49 weeks ago
49 weeks ago Link To Comment
Obama made the decisions to close down these programs and parks that hurt small businesses, all to keep Obamacare, another industry destroying government program. Go blame him. And if you think 11 days of lost SBA loans hurts the economy, wait until people are dinged an extra 12k a year for their new "affordable" healthcare that they can no longer spend on other things, like houses and cars and appliances.

And there is no economic recovery happening. That's another lie.
49 weeks ago
49 weeks ago Link To Comment
More political theater from the Democrats. Note they don't hold Obama responsible for shutting the parks, especially the parks that didn't need to be shut. And if you rely on gov't for your cheese, you are at their whim. SO don't be surprised when you get caught up in it.
49 weeks ago
49 weeks ago Link To Comment
And this is how tyrannies are created. The conversion of folks switching to what can I do to improve my position in life to what's in it for me...the "inafor's" that David Feintech wrote about.
49 weeks ago
49 weeks ago Link To Comment
Let's see I am a small business owner (this is hypothetical) who saw a business opportunity in DC because of a combination of a concentration of Federal employees and tourists. I used my own capital. Now due to the actions of [generic] politicians I have lost a substantial amount of business. So according to you I should have invested in a less profitable business?
49 weeks ago
49 weeks ago Link To Comment
Business comes with risk. Did you not factor risk into your (hypothetical) business plan?
49 weeks ago
49 weeks ago Link To Comment
Since long government shutdowns have been a black swan event you can't factor in the risk. If this happens more often then you can. It sounds like you would like to restrict people from opening businesses in areas where there is a large federal workforce.
49 weeks ago
49 weeks ago Link To Comment
So, you relied on the FedGov for support, a FedGov headed by that thug Obama, and you are screwed by the shutdown? Well, what the heck did you expect?
49 weeks ago
49 weeks ago Link To Comment
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