Worried Small Businesses Testify in Senate Hearing
WASHINGTON—In a U.S. Senate hearing on Oct. 15, entrepreneurs and senior executives testified on the impact of the government shutdown to their businesses.
It was fifteen days into the government shutdown and two days prior to eminent threat of the U.S. defaulting on its debt obligations. Of course, Congress ultimately came through and passed a bill to fund the government till Jan. 15 and raise the debt limit till Feb. 7.
At the time of the hearing, no one knew if and when the crisis would be resolved. It was very disconcerting to healthcare, technology, and tourism company executives and bank executives from the Washington, D.C. metro region, who described painful nonrecoverable losses in testimony before the Senate Committee on Small Business and Entrepreneurship.
“The financial impact has been horrible, our revenues are down about 25 percent and it continues to go down from there. Most of our employees are not billable, which means that we have a big decrease in revenue and we will see this decrease for the next months, said Sabrina Poole, president and CEO of Systems Engineering Research Development Institute (SERDI) in Gaithersburg, Md., a cyber-security and IT consulting firm that services the federal government.
Pool said that it will probably take a year to recuperate from the losses. SERDI was forced to lay off employees.
Poole expressed concern that some of SERDI’s contractor staff’s security clearances may be in jeopardy if employees fall behind in paying their bills. Credit history is part of the evaluation criteria of security clearances, Poole said.
Enlightened, Inc., an IT and cyber security consulting firm, has also laid off employees. The company furloughed 27 employees since Oct. 1, said Antwayne Ford, co-founder and president, Enlightened, Inc.
“Not only do I fear losing established personnel, but my company faces an equally daunting challenge to attracting new talent to a field in a government that has become an increasing unreliable employer for us… Enlightened, Inc. cannot afford to wait and wait and wait while our government leaders in Congress negotiate our livelihood,” said Ford.
Eaglebank, a community bank located in Bethesda, Md., experienced challenges in servicing its small business clients as a result of the closure of the U.S. Small Business Administration (SBA). The bank represents thousands of small businesses, said Ronald Paul, chairman and CEO of Eaglecorp, Inc. and Eaglebank.
“At Eaglebank we have over 30 new SBA loans in process, totaling $37 million dollars, but we can’t proceed because the SBA has closed its doors and when they reopen, there will be uncertainty about when loans will be ready to close because we don’t know how long the backlog will be,” said Paul.
Small business SBA loan borrowers also face forfeiting deposits posted to secure loan contracts to purchase properties and other assets to grow their businesses, according to Sally Robertson, president and CEO of the Business Finance Group. Borrowers face losing deposits that can exceed $200,000 in addition to the costs invested into determining the feasibility of purchasing land assets, Robertson stated in written testimony.
The business finance group has 12 small businesses with $9.5 million in SBA 504 loans that were awaiting the October bond sale scheduled for Oct. 16. SBA 504 loans are funded through Wall Street bond sale processes in which the SBA provides a full faith and credit guarantee to the investor, according to Robertson’s written testimony.
A small jewelry store in Hunt Valley, Md. that expects to create five new jobs with SBA 504 loan funds is among the businesses that were awaiting the October bond sale.
The debt ceiling debate that threatened the credit rating of the federal government impacted the 504 loans backed by the credit guarantee of the federal government, according to Robertson. Uncertainty in the 504 bond sale may mean greater risks associated with the sale which may mean higher costs to small business borrowers.
Beyond the Washington region, in Salt Lake City and throughout the U.S., small business that rely on sales from tourism to National Parks have been hardily hit by the government shutdown, said Keith Griffall, co-founder and CEO of Western Leisure, Inc., an inbound travel services company based in Salt Lake City, Utah.
Senator Jeanne Shaheen (D-N.H.) said, “I think that every one of us here are frustrated and unset by the irresponsible and reckless behavior of some members of Congress that have brought us this point and we all believe that we need to start the government immediately… and that we should end these manufactured crises and get on to the business of running the government.”
Two days later, the federal government reopened and the debt limit was raised. The doom and gloom atmosphere in the hearing room for now has been lifted—that is, until the next government crisis.