Government shutdown 'will hurt' small businesses: SBA Administrator

A looming government shutdown could not only affect government workers or national parks- it could impact small businesses in the U.S. Small Business Administration Administrator Isabella Casillas Guzman joins Yahoo Finance Live to breakdown the “devastating impact” of a shutdown on small businesses.

Funding will be a major concern for small businesses due to loss of access to government-backed loans, which may lead some to pursue high-interest private loans. Referencing the pandemic and the heavy blow it dealt to many small businesses, Guzman expresses concern for those that are “starting to see the light,” but now have to worry about how a shutdown could send them back into debt or other forms of stagnancy.

Referring to small business and the role they play in the U.S., Guzman insists "they are the job creators," so stability is high priority.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

SEANA SMITH: The government's risk of shutting down if lawmakers fail to reach a spending deal before the deadline, and if we do, in fact, see a shutdown, small businesses could be at risk. There's a recent survey out from Goldman Sachs that found that 70% of small business owners warn that businesses-- their businesses would be negatively impacted with revenue a top concern. Here to talk about that and more we want to bring in Isabella Casillas Guzman, administrator of the US Small Business Administration. Administrator Guzman, it's great to have you here. Thanks for joining.

ISABELLA CASILLAS GUZMAN: Thank you for having me. Great to be here.

SEANA SMITH: So when we talk about the threat of a government shutdown, what exactly that is going to mean for small businesses, give us a better sense of that risk.

ISABELLA CASILLAS GUZMAN: Well, Republican shutdown is definitely going to have serious consequences for our economy, and it will hurt small businesses. For example, at the SBA, it will halt all of our SBA-guaranteed small business loans. We put out about $40 billion a year to help support small businesses with affordable capital. And in an environment with-- where there's tight credit and higher interest rates, SBA-backed loans are highly critical today.

And each day of the shutdown, there will be hundreds of loans that would be stuck, unable to move forward. That might mean a small business has to go to a high interest bridge loan and pay fees that are exorbitant for their business to manage, and they might lose a deal or lose an ability to buy some equipment or buy property, and that's what's going to hurt businesses, and the uncertainty of it all as well.

BRAD SMITH: Administrator, what type of small business funding have you also been trying to put forward as part of the budgeting process?

ISABELLA CASILLAS GUZMAN: Well, we've obviously tried to continue to build up all of our great programs. We help small businesses grow their revenues as well as provide that affordable capital through investments and small business loans. And in particular, when we talk about revenue growth opportunities, this is a historic time when we're investing in America. There are contracts to win around the country.

One of the things that would also be halted in a Republican shutdown would be the processing of certifications to do government contracting for our veteran-owned small businesses and service disabled veterans small businesses and women and others, and that limits competition in the federal marketplace and really prevents businesses from moving forward with their revenue growth strategies. And we need all of our small businesses to be successful.

We have an incredible footprint on the ground-- a network of over 1,600 centers. While each of those are independent nonprofits that we provide grants to, we can't provide oversight and customer service for them to continue their good work. So we know that there's going to be devastating impact, and we continue, of course, to put forward in the president's budget a plan that will continue to grow our great capital programs as well as our networks and support to small businesses.

SEANA SMITH: Administrator, I'm curious to get your perspective on this, just in terms of the general sense of sentiment right now of small business owners given the fact that this is just-- when we talk about the government shutdown, this is just the latest in a long list of uncertainties that many of these small business owners have been facing now for quite some time.

ISABELLA CASILLAS GUZMAN: That's right. I mean, uncertainty is what any small business owner will tell you is disruptive. You can't plan around that. And they're problem-solvers themselves, you know? They have a lot of grit and determination to be resilient. But they want to solve problems, and this is a problem that they want to see solved because obviously it could have an impact on their business and their ability to respond quickly in the marketplace.

And a lot of these businesses are already straddled with debt, already straddled with having to have reduced revenues during the pandemic. They're starting to see the light and starting to see recovery and want to be able to persist on a very strong plan for growth. Any disruption at any time for them in the next few months is not going to be helpful to their businesses, and so that's why this Republican shutdown is even more detrimental to our small businesses because there's no time for further disruption when pandemic disrupted their lives so much.

BRAD SMITH: And it seems like, from that perspective, small businesses can't catch a break where you think back all the way to the pandemic or if you fast forward to this year and the number of different union negotiations that have taken place and strikes that have also meant that some of those small businesses don't have the same amount of paying customers that are coming through and for now as they're staring down a potential government shutdown where that funding could go in a different direction or just not be able to be disbursed to them.

So where ultimately are we able to see a clear light at the end of the tunnel for these issues to be surpassed for small businesses and then for a clear runway for growth of small business in the US especially as we look towards 2024 and hopefully many of these issues being in the rear view mirror?

ISABELLA CASILLAS GUZMAN: Yeah, well, just recently the Chamber of Commerce had done their optimism study, and it was hopeful for small businesses. And as I said, they-- many of them are benefiting from not only the COVID relief that helped position them and help them survive during the pandemic but they're going after investments in America, whether that's contracts and helping us build our roads and bridges or whether they're manufacturers or an innovation economy and are planning for the future.

You know, they have a strong hope in the future, and that's what they're-- what's so amazing about our entrepreneurs in this country. And we've seen 13.6 million new business applications filed. These are businesses that we want to see survive. They're the job-creators. They're the ones who are going to create the products and services for the future that'll make our economy globally competitive.

And so as we-- as we look to continue to try to build resilience within our small businesses, they've had to, as you can imagine, plan for so much disruption. They've obviously had to be more agile and more efficient in their operations. But again, there's only so much that they can sustain. And further disruption when it's unnecessary, when we could actually see that this disruption, this shutdown could affect them but it could be solved, the Republicans could take action, this is something that is very alarming to our small businesses who don't want to see disruption when there could be problem-solving instead.

BRAD SMITH: Administrator Guzman, just lastly while we have here, the FTC has sued Amazon for illegally maintaining monopoly power-- the allegation that's come forward. We no doubt have heard many small businesses talk about the practices of Amazon over the years, but do small businesses want a break-up of Amazon?

ISABELLA CASILLAS GUZMAN: You know, it's a complicated issue for sure because we saw, especially during the pandemic, small businesses depending on digital technologies, on key platforms to be able to build revenue and get their products out the door when oftentimes retail and main streets were negatively affected. Being online also means opening up to marketplaces abroad. And on a lot of these platforms, you see small businesses trading with multiple countries and really building their businesses.

So it's a challenging topic. Obviously small businesses want to increasingly leverage digital ecommerce and take advantage of the more than $5 trillion digital ecommerce marketplace that is global. So you know, I know that small businesses want to continue to have options to move forward.

Clearly, the FTC is moving forward with investigating, making sure that there's no price gouging happening. But we, of course, want to see small businesses continue to go digital, whatever that platform or however they're able to most successfully do it. And we've stood up a platform for them to be able to find out about all the digital tools that are available to grow their businesses.

SEANA SMITH: Minister Guzman, it's been great to speak with you. Thanks so much for joining us here on Yahoo Finance this morning. Isabella Casillas Guzman, administrator of the US Small Business Administration.