Small Businesses Could Suffer If The US Defaults On Its Debt. Any Options?

(CTN News) – Our country is in the midst of a Small Businesses debt crisis the likes of which we have not seen since Barack Obama faced the Tea Party in 2011.

No one is certain whether the federal government will default on its debt by the end of this month. The failure of Democrats and Republicans to reach an agreement will have an enormous impact on small businesses throughout the country.

According to a recent report by Goldman Sachs, approximately 65% of small businesses believe that a default would negatively impact their operations. The news is very bad. A total of 45% of all private-sector jobs were held by small businesses in the first quarter of 2022.

Small businesses that contract directly with the federal government will be the first to be impacted. The federal government awarded over $154 billion in contracts to small businesses in fiscal year 2021, about 27% of all government contract spending that year.

It does not include the small businesses that receive indirect funding from larger construction firms or firms that receive government funding and subcontract out work to them.

There will be significant negative cash flow effects on these small firms if Janet Yellen is forced to prioritize interest and debt payments above all else. Nearly half of small businesses have less than three months of cash on hand.

In addition, there are small businesses that provide services to government properties. The Cato Institute estimates that the federal government owns or leases more than 350,000 buildings and properties nationwide.

Small businesses that provide construction, maintenance, security, cleaning, electrical, landscaping, and other types of services rely heavily on these facilities for their revenue.

Every day, the employees of these buildings rely on neighboring businesses for a variety of products and services, including lunches, dry cleaning, yoga, happy hours, and other services.

This would be a significant blow for these businesses, which are already grappling with the increase in the number of employees working remotely.

In addition, the government performs a number of functions. A wide range of government services are available to individuals and small business owners.

In addition to applying for passports, they are questioning the Internal Revenue Service, awaiting regulatory approvals, and waiting to receive loans from the Small Business Administration.

The re-direction of funds could result in the suspension of these and many other critical government services.

These are all immediate consequences of the government having to avoid defaulting on its loans. In the long run, the effects are even more devastating.

In the event that the situation persists, the credit and financial markets will be volatile, and banks will be forced to limit the financing they offer to only their most secure (and usually largest) customers, which means that many small businesses will have to either wait for a loan or be refused one.

Approximately 77% of small business owners surveyed by Goldman Sachs expressed concern about their ability to obtain financing.

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