How a government shutdown impacts your small business

In the United States, a government shutdown happens when the federal government fails to pass funding legislation for the upcoming fiscal year. In the 1980s, shutdowns were too brief to cause major economic effects, but they’ve since grown much longer on average.

Each shutdown that lingers beyond four days can ripple across the economy—as federal services, contracts, regulations, business loans, and customer trust are disrupted while federal employees are either locked out from work or indefinitely forced to work without pay.

Among business owners, small businesses bear the brunt of shutdown effects. Even if you don’t work directly with the U.S. government, each shutdown intensifies the usual economic struggles of running a small business, and can substantially impact your cash flow, upcoming projects, and local community.

Did you know?

According to our recent survey, nearly 4 in 10 small businesses have less than a month of cash on hand to cover expenses.

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Why does the U.S. government shut down?

To formally establish federal funding for the coming fiscal year (which begins October 1), 12 appropriations bills must be passed by Congress and signed by the president. Partisan disagreements can stall passage even if one party controls both houses of Congress, as dissenting Senators can always filibuster debate. Filibusters can only be ended if a supermajority (60%) of Senators vote to do so, which, in practice, means the federal budget requires the approval of 60% of Senators.

If Congress fails to pass all 12 appropriations bills by October 1, they can pass a temporary budget or a continuing resolution to extend last year’s budget for a limited time. If they fail to pass any of these, or if the President vetoes them, the government enters a funding gap, and shutdown procedures begin.

Government shutdowns are unique to the United States. Other democratic governments in the Americas, Europe, and Asia remedy funding gaps with a vote of no confidence and/or a snap election, while continuing to operate on the previous budget. The U.S. government operated during its six funding gaps from 1976 (when revisions to the budget process went into effect) to 1980, when President Jimmy Carter requested that Attorney General Benjamin Civiletti interpret and apply the Antideficiency Act to the congressional budget process. Civiletti concluded that government agencies—except those that protect life or property—are not authorized to operate during funding gaps.

Terms you should know

An appropriations bill establishes how the federal government allocates its funds to different programs and agencies. Unlike other types of budget legislation, appropriations bills can only focus on funding.

A filibuster is a tactic used by U.S. Senators to delay or block a vote on a bill, often by extending debate via long speeches. As mentioned above, a 60% majority vote is required to end a filibuster and vote on the bill in question.

The Antideficiency Act is an 1884 bill that was amended in 1950, which prohibits federal agencies from using more federal funds than they’re allowed or from using federal funds before they’ve been appropriated. Attorney General Benjamin Civiletti issued two opinions in 1980 and 1981 interpreting this act as it applies to the federal budget process. The bill was amended again in 1982.

How many government shutdowns have there been?

Since Civiletti’s opinions, there have been 15 funding gaps lasting at least one full day, including the most recent one beginning October 1, 2025. The length and impact of these shutdowns has changed significantly: Of the nine funding gaps that occurred under Presidents Ronald Reagan and George H.W. Bush, none lasted longer than three days. Four were so brief that appropriations bills were passed before any agencies could start shutting down.

But among the six funding gaps since 1990 (including October 2025), five of them lasted five days or more, long enough to shut down the government and meaningfully disrupt the small business economy.

What stops during a government shutdown?

Since 1981, U.S. government agencies can’t legally operate during funding gaps, except for work we now deem “essential”. Employees deemed essential must continue working without pay, while employees deemed “non-essential” are furloughed, or locked out from work, also without pay.

What happens to government work during a shutdown?

For small businesses, some services—such as those provided by the United States Postal Service (USPS), Social Security Administration, and Department of Veterans Affairs—continue largely unaffected during shutdowns. However, many services that are important to business owners become strained, or in some cases outright suspended.

Immediate effects of government shutdown on small businesses

If you’re a U.S.–based small business owner, here’s what you need to act on when the government shuts down:

• SBA loans: SBA 7(a) loans and SBA 504 loans are suspended, meaning you can’t submit new applications or get approved for new actions on existing loans, though you’ll still owe timely payments. Recently approved or periodic loans may also take longer to reach your business checking account.
  • Affects businesses that depend on SBA loan capital. See the recent SBA report here.
• Federal contracts: The U.S. government can’t sign new contracts or modify existing ones. Contract work deemed essential might continue, but pay might be withheld or delayed. Work deemed non-essential will either be terminated or placed on stop-work status until the government re-opens. Contractors are not guaranteed backpay for work done during a shutdown.
  • Affects businesses that provide services to federal agencies, conduct or rely on government research, or rely on federal funding.

• Taxes, permits, registrations: Federal regulatory services—including inspections, permits, registration, and licensing—are postponed until the shutdown ends. The IRS operates at a limited capacity, so processing of tax returns, business registration, and citizen verification may not be available.
  • Affects businesses that require legal authorization, inspections, registration or information changes, or tax services.
• Travel: Many employees of the Federal Aviation Administration (FAA)—including air traffic controllers—are furloughed, which can ground and delay flights across the country. The FAA also can’t certify new pilots, creating a short-term shortage after the shutdown. Other transportation services like Amtrak must scale back service and maintenance while they’re deprived of federal funding.
  • Affects businesses whose operations benefit from or require long-distance travel.

Each business day the shutdown continues, an estimated 320 small businesses nationwide are unable to access $170 million in SBA-backed commercial loans…. The loan programs are funded by lender fees and operate at zero subsidy, or zero cost, to taxpayers.”

– SBA analysis on October 21, 2025

Secondary effects of government shutdown on small businesses

Among business owners, shutdowns disproportionately impact small businesses, 39% of which don’t have enough cash on hand to cover more than one month of expenses. Large businesses, meanwhile, have less trouble covering expenses while services are suspended—in fact, the S&P 500 tends to grow during shutdowns. It’s also rarely obvious how long a shutdown will last, and the longer the government is shut down, the more likely any resultant economic shocks are to affect your business.

Because furloughed workers receive no pay until the government re-opens, long shutdowns crater the cash flow of businesses that cater to federal workers or to visitors of closed public lands and institutions. Banks may tighten their business lending criteria and/or delay processing loans that require ID verification, business verification, or SBA underwriting.

As a shutdown drags on, economic and monetary policy decisions (such as federal funds rate adjustments) become difficult for the federal government to make, as shutdowns pause the routine reporting of labor and spending data. For businesses, authorization, verification, and service delays grow into backlogs which beget further delays, potentially rippling through supply chains. Over time, repeated lengthy shutdowns can lower customer trust in industries that rely on federal partnerships.

When do government shutdowns end?

A U.S. government shutdown ends when Congress passes all appropriations bills for the next fiscal year and the president signs them. This allows federal agencies to receive funding, without which they aren’t allowed to operate (according to Benjamin Civiletti’s opinions interpreting the Antideficiency Act). 

The exact pressures that lead to partisan compromise vary between shutdowns. Before October 2025, the second- (21 days) and third-longest (16 days) U.S. government shutdowns ended when Congressional Republicans, seeing no path out of deadlock and losing public support, relented to the proposals of Democratic Presidents Bill Clinton and Barack Obama, respectively.

The longest pre-2025 shutdown, from 2018–19, was similarly deadlocked. After 30 days, AFA–CWA President Sara Nelson publicly called for a general strike to end the shutdown, and after 35 days air traffic controllers (federal employees going without pay) began a sickout—a labor action in which many employees call out sick. The FAA, already strained by the shutdown, was forced to delay flights across the east coast, and Congress agreed to a budget hours later.

What you can do during a government shutdown

1. Freeze your cash forecast and rebudget

If your business depends on funding, data, or any contribution from the federal government, freeze your projected cash inflow from those contributions. Rewrite your budget for the next 15, 30, and 45 days to prioritize payroll and any legally required payments (which are unlikely to pause). Negotiate with vendors or landlords to temporarily relieve any regular financial obligations.

2. Track all delayed payments and permits

Keep detailed records of any damages caused by the suspension of federal services, as you may be able to make tax, legal, or insurance claims after the shutdown ends. Damages include delayed permits, missed payments, canceled contracts, or other additional costs to your business. Record dates, documents, and any communications that corroborate your claims. 

When the government re-opens, use these records to apply for emergency relief from both the state and federal governments.

3. Tap your business line of credit and other emergency funding options

If you have a business line of credit, draw on it to help cover cash flow gaps during government shutdowns. A new line of credit or term loan may be harder to acquire because of increased demand and limited verification resources. 

While these options will have similar impediments to their approval process, a financial technology company, credit union, community development financial institution, or your state government may also be able to approve loans and assistance during a shutdown.

Need access to working capital? Explore your options with Bluevine.

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4. Reach out to partner businesses and aid organizations

If your entire industry is affected by government shutdowns, cooperate with similar businesses to pool orders, share work, or otherwise support one another. Group arrangements in the short-term can help keep a local industry community afloat.

As you’re able, offer assistance to customers affected by the shutdown. Many federal workers either furloughed or working without pay rely on benefit programs like SNAP or WIC whose funding is paused and at risk of depleting during shutdowns longer than a month. This assistance not only reflects your brand values, but could help struggling families preserve their way of life.

5. Communicate with employees, vendors, landlords, and customers

Internally and externally, everyone who interacts with your brand should know the basics of how the shutdown affects your business. Be prompt and clear with employees about what work is and isn’t possible, and whether their pay will continue on time. Reach out to vendors and landlords with your new cash flow projections and negotiate temporary terms. Notify customers—via email, social media, a website banner, storefront signage—of impacts to products, services, and operations.

How to prepare for future shutdowns

Even when federal budget disputes occur, it’s difficult to know if a shutdown will last one day or multiple weeks, or whether a shutdown will even happen at all. For example, Congress may pass a continuing resolution, or the president may veto approved bills. If a government shutdown would significantly impact your business, use the following strategies to pre-emptively cushion the blow:

• Maintain an emergency cash fund and open a business line of credit. Government shutdowns are an illustrative example of when 8–13 weeks of operating expenses on hand and a line of credit can help support your business through an emergency.
• Add shutdown clauses to vendor contracts. If any party in your supply chain would be vulnerable during federal shutdowns, establish procedures for navigating funding delays, furloughs, etc., ahead of time.
• Diversify revenue streams. If possible, make sure your business earns revenue from local, state, or private partnerships outside of federal contracts.
• Organize local business owners. Organize businesses in your local industry or neighborhood to provide a mutual emergency fund and community-run alternatives to government services during shutdowns. Groups like these can also lobby city and state governments for disaster funding against federal shutdowns.