The government shutdown, which went into effect Oct. 1, continues to loom and if you are a small business owner, especially one that works with government contractors, you could be affected in several ways.
Non-essential government workers are being sent home (aka furloughed) until the end of the shutdown and most likely won’t get paid for that time. Their projects will likely stagnate and be delayed. Essential workers, such as military personnel and those who support them, will continue to work and get paid, though it is likely their pay will be late to arrive according to some reports.
Government Contract Financing to Be Hit Hard by Shutdown
The picture is far less clear for government contractors employed directly by private companies but who generally bill the government for hours worked by contractors. According to the Washington Post, this means that small businesses that employ non-military support, non-essential government contractors will have to decide themselves whether to furlough these workers. Alternatively small business owners may have to reach into their own pockets to cover payroll as the government may or may not reimburse them. If they do, you can bet it will not be quickly. This puts businesses that operate in the loosely defined area of non-essential in a very tough predicament, especially if they have their own contractual deadlines to meet.
Factoring Receivables Can Help with Government Contract Funding
Businesses stuck in the middle of these difficult situations through no fault of their own have other options to consider in order to secure cash to keep projects moving. Accounts receivable factoring is one option that allows business to keep moving even though the government has decided to come to a halt. With factoring receivables, businesses can sell their existing invoices for immediate cash that can be used to cover payroll or other expenses. An invoice factoring company that is familiar with factoring government receivables will work with you to see if it can secure funding despite the challenging environment.
More than just government contract factoring, other businesses are being directly or indirectly affected by the shutdown as well. The government’s Small Business Administration Loans, which has guaranteed more than $100 billion in small business loans in recent years, will also be shut down until the government starts rolling again. Instead of waiting for these types of small business loans, it might be a great time to take a look at factoring accounts receivables.