Most everyone is aware of the turmoil gripping the federal government right now. Maybe you’re directly impacted by the Department of Government Efficiency (DOGE) and its cuts to government ranks, services, and contracts — or maybe you’ve simply been watching from afar. Either way, if you run a small business, there’s a good chance that the instability could affect you in ways both large and small. It’s an oft-misunderstood fact that small businesses and the federal government are intertwined in a few key ways. Here are a few examples of how instability at the top can have ripple effects that impact those at the bottom.
1. Funding and Small Business Loans
One of the most basic (and direct) ways small businesses rely on the federal government is through lending programs administered by the Small Business Association (SBA), a federal agency. Many business owners turn to SBA-underwritten loans at various stages — whether that’s starting a new business, acquiring an existing one, or simply borrowing some money for operational funds. Most business owners believe that it’s the private lenders they’re engaged with who provide the loan, but the truth is that the SBA guarantees many of these loans through private lenders — making the lenders more willing to offer these loans and making it easier for small businesses to secure funding they otherwise might not be able to qualify for. Without a functional SBA continuing to offer these guarantees, small business funding might simply dry up — creating severe economic headwinds for the business community.
2. Regulatory Approvals and Licensing Delays
Many businesses both large and small require federal licenses, certifications, or regulatory approvals of some kind or other to operate legally. Agencies like the Federal Communications Commission (FCC), the Environmental Protection Agency (EPA), and the Food and Drug Administration (FDA) all oversee industries that small business might touch without even realizing it. If these agencies can’t operate — whether due to staffing or budget cuts — the businesses that rely on these approvals could face severe delays or an outright inability to operate.
3. Supply Chain and Transportation Disruptions
Most of our national infrastructure (e.g., roads, ports, and air traffic control) are managed, administered, or supported by the federal government. Much of that infrastructure is built and maintained through public-private partnerships, development grants awarded to state or municipal governments, or contracts awarded to local construction companies — typically by city or state governments using federal grants. Agencies like the Federal Aviation Administration (FAA) and the Department of Transportation (DOT) also manage this infrastructure to ensure that goods can move quickly, efficiently, and — ideally — cheaply across the country. If these agencies experience a lapse in funding or staffing cuts, they may scale back operations — leading to delays at ports of entry across the country and supply chain delays that impact small businesses reliant on just-in-time inventory or perishable goods.
4. Contracts and Federal Procurement
Many small businesses are heavily reliant on government contracts for their revenue. Even though many of these contracts are awarded by state or local government agencies, a surprisingly large number of them are underpinned by federal grants and awards. When these grants, awards, or direct federal contracts are impeded, the businesses that rely on them often have no recourse. One need only look at the contract rescissions being undertaken by DOGE to understand how little power small businesses have to protect their interests under government contracts, and so instability at the federal level should be of significant concern to small businesses reliant on government contracts.
5. Workforce and Employment Assistance
The federal government has historically (at least since the 1930s) offered programs that support workforce development. These include job training initiatives, apprenticeship programs, unemployment assistance, and tax incentives for employers. The federal government also oversees critical workplace safety agencies and initiatives to ensure that employers and employees are aware of and abide by the law around suitable workplace conditions. Instability at the federal level puts all of these programs and initiatives at risk, creating uncertainty for employers and employees alike.
6. Disaster Relief and Emergency Assistance
We’ve encountered an unprecedented number of natural disasters, public health crises, and economic downturns in this modern era, which can devastate small businesses, their owners, and their employees. Agencies like the Federal Emergency Management Agency (FEMA) and the SBA provide disaster relief funding, emergency loans, and other means to keep businesses afloat in the midst of these tragedies. A delay in federal assistance following a major event can leave small businesses without immediately needed resources, leading to permanent closures and job losses.
Preparing for Potential Disruptions
If you’re a small business owner, it’s essential to understand how you may be inadvertently relying on the federal government or its services and to have a contingency plan in place if those services are severely disrupted. Maintaining strong cash reserves, diversifying revenue streams, and staying informed about the latest government disruptions can help mitigate your risks.
It’s also important to understand what your responsibilities are in an ever-changing regulatory landscape. If you’re unsure, the best thing you can do is to get the expert opinion of a seasoned, licensed attorney with experience in business law and an understanding of the unique needs and pressures facing small businesses. We’re here if you need to talk, offering flat-rate attorney consultations on a large number of business-related topics.
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