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To understand the implications of lost or delayed paychecks, Mark Cerminaro, chief revenue officer at Rapid Finance,
consider this revelation from the Federal Reserve: 40 said, "A lot of businesses not directly tied to the [federal]
percent of adult Americans in 2017 were unable to cover government – for example restaurants, hotels and livery
an unexpected expense of $400 without selling something services – saw some very big impacts which won't be
or borrowing money. "This is an improvement from half of recouped." Formerly known as RapidAdvance, Rapid
adults in 2013 being ill-prepared for such an expense," the Finance is a Bethesda, Md.-based firm that specializes in
Fed wrote. But it reflects the fact significant numbers of lending solutions (like merchant cash advances) for small
Americans live paycheck to paycheck. The Fed's revelation businesses. "There are so many ripple effects," Cerminaro
was contained in its 2017 Report on the Economic Well Being added. "The small business community is reliant on people
of U.S. Households in 2017. spending money."

Scores of banks and credit unions came to the aid of Bracing for future shutdowns
federal employees with low-cost, short-term loans. "We Small businesses also have borrowing needs, and many
understand the financial pressure that many of our small business loans are facilitated and guaranteed
customers who serve our nation are now facing and we're through the Small Business Administration, which was
here to help," said Andrew Cecere, chairman, president shuttered in December and January.
and CEO of U.S. Bank. Not surprisingly, payday lenders
fared well during the shutdown. One such lender, World One such business is Port City Brewing Co. in Alexandria,
Acceptance Corp., saw its stock price rise by nearly 19 Va. "The shutdown affected Port City by furloughing SBA
percent in January. staff who were working on a loan application for a new
A $3 billion economic hit bottling line. "Because of the closure, we were unable
to lock in an interest rate, which could increase the cost
According to the Congressional Budget Office, the of our loan by thousands of dollars," Bill Butcher, Port
shutdown diminished the nation's real gross domestic City's founder, told members of the House Small Business
product (GDP) for the first quarter of 2019 by $8 billion, or Committee.
about 0.2 percent. That's on top of a $3 billion (or 0.1 percent)
reduction in real GDP for the fourth quarter of 2018. And "Not only are small business owners unable to get loans
while some GDP lost during the shutdown is expected through the SBA during the shutdown, but there will be a
to be recovered eventually, the CBO estimated about $3 significant backlog once the SBA is operational again," Ben
billion in foregone economic activity (or an estimated 0.02 Gold, president of QuickBridge, a small business lender,
percent of 2019 GDP) will never be recovered. said in a January 24 video distributed to reporters.
Among small businesses surveyed by QuickBridge in
"Underlying those effects on the overall economy are January, 31 percent said the shutdown was having an
much more significant effects on individual businesses impact on sales; 30 percent said they expected tax refund
and workers," CBO Director Keith Hall wrote in a January delays (which can affect consumer spending) and hiring
report. "Among those who experienced the largest and slowdowns.
most direct negative effects are federal workers who faced
delayed compensation and private-sector entities that lost Many businesses that sell to the federal government
business. Some of those private-sector entities will never saw sales plummet. "The government shutdown had a
recoup that lost income." measurable impact on my business, my employees, and
I imagine on all small businesses delivering services or
Hall said the shutdown "dampened economic activity products to the federal government," Heidi Gerding, CEO
mainly because of the loss of furloughed federal workers' of HeiTech Services in Landover, Md., told the House Small
contribution to GDP, the delay in federal spending on Business Committee. "Although some small businesses are
goods and services, and the reduction in aggregate claiming that they had little impact, I can only speculate
demand (which thereby dampened private-sector that they don't know the full impact to their business or
activity)." But he added that the agency's estimates are [they don't] know how to calculate it and/or it is too much
"subject to considerable uncertainty." For example, Hall work for them to track."
noted, the CBO cannot say for certain how federal workers
and contractors adjusted spending during the five weeks Many small businesses, and the intermediaries that help
they went without paychecks. these businesses secure SBA backing, have turned to
alternative lenders, like Rapid Finance and QuickBridge.
George Sarantopoulos, president of Access One ATM Inc., "They're looking for solutions that can meet short-term
said his firm saw a "significant drop" in ATM transactions capital needs and serve as a bridge to the long term,"
during the five-week shutdown. "We have a sizable Cerminaro said.
portfolio in the D.C. area, and there's no question that
there was a drop," he said. Complicating matters, the legislation passed by Congress
in January ending the shutdown was only a temporary fix
intended to keep agencies running through the middle

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