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Mon October 14, 2013
Shutdown Puts Small Businesses in Tight Spot
The ripple effects of the government shutdown are starting to extend beyond federal employees into the private industry. Small businesses are bracing for a range of issues from delayed regulatory approvals to a possible crunch in cash flow.
Bloomfield-based Cursor, LLC, which does machining work for the Department of Defense (DoD) and the U.S. Navy, has an order backlog of $250,000 but had to stop production when source inspectors at the Defense Contract Management Agency (DCMA) were furloughed. That problem, says Michelle Allinson, president of Cursor, has since been solved with the recall of the majority of the DoD’s civilian workforce, including DCMA inspectors. But she’s worried that the Defense Finance and Accounting Service (DFAS) will run out of funds in less than two weeks.
“Now we are able to ship the product, because DCMA is back,” Allinson said. “But we’re uncertain about the ability of DFAS to pay the contracts. A lot of the backlog that we have right now is due probably in about 120 to 180 days. So we are hoping that by the time that it becomes crucial to us to be paid, the government will have the funds to pay us.” Allinson is also the vice president of Aerospace Alloys, Inc. in Bloomfield. Even though only ten percent of its business comes from the government, she said she’s starting to feel the pinch in cash flow and is talking to banks to secure lines of credit.
Meanwhile, biotech companies are also feeling the uncertainty. Part of the impact at Protein Sciences Corp. in Meriden include stalled grant applications with the National Institutes of Health and lack of market data after the Centers for Disease Control and Prevention stopped tracking the flu. Earlier this year, the company obtained approval from the Food and Drug Administration (FDA) to sell the world’s first eggless vaccine this year to people in the 18-to-49 age group. Manon Cox, CEO, said she’s hoping to obtain approval for a wider audience. “The FDA is not accepting any supplements,” she explained. “And we have completed all the work to obtain licensure of Flublok for seniors; people over 50 years, and unfortunately, the FDA is not accepting any new applications at this moment in time.”
On the banking side, new commercial borrowers will have to hold onto their federal loan applications until the U.S. Small Business Administration reopens its doors. But Robert Polito, director of Webster Bank’s government-guaranteed lending, said he anticipated the delay and was prepared. “When Labor Day came, I instructed all my bankers to communicate with their borrowers and say, ‘Listen, if you’ve got a commitment out there, you’d best get it back to us so we can start the process and get your loan approved through the U.S. Small Business Administration,” Polito pointed out. “Many listened. But if you didn’t accept the deal, so to speak…hopefully, this will be a short shutdown.”
Before the shutdown, said Peter Gioia, economist at the Connecticut Business and Industry Association in Hartford, the economy was growing reasonably well. He said the table was set for a potential party, but now the punch bowl was taken away. “They’ve already done something that from economic terms is not positive,” he explained, “and if they continue down that path over the next couple of weeks, then it’s really going to have a negative impact. I think eventually we’re going to get back on the track to growth, but whether we get back on that track to growth in November or we get back on that track to growth in March or April, it’s a big difference to a lot of people.” Gioia said the recovery from the shutdown could take a long time, if Congress doesn’t react quickly to the debt ceiling as well.