In the short span of a year, the Federal Reserve raised the fed funds rate four times, increasing prime from 4.5 percent in December 2017 to 5.5 percent as of Dec. 20, 2018. Although it's nowhere close to the record high set in December 1980 at 21.5 percent, the fact remains that interest rates are steadily on the rise. What this means to small business owners is the cost of SBA loans are also on the rise, as the maximum allowable SBA rate is 2.75 percent above the prime rate.
While interest rates on the rise affect a business owner's bottom line, it pales in comparison to the issues that have occurred because of the U.S. Government shutdown in January. The shutdown, which began on Dec. 22, 2018, caused the closure of a long list of federal government operations and agencies, among them the Small Business Administration (SBA) and the Internal Revenue Service (IRS). The longest shutdown in U.S. history--which ended Jan. 28 with the threat of another shutdown still in play at time of writing--caused a ripple effect in the lives of American small business owners across the country that will be felt for months and possibly years to come.
Here are a few of the more immediate ways that the closure of these two agencies has affected our small business community.
IRS and Taxes
While new businesses have always had the ability to apply for an EIN (Employer Identification Number) by filing electronically, those that have experienced issues with an assignment, or for which a request was denied, need to wait to speak with someone at the IRS.
Although business owners must adhere to tax filing deadlines, there will be delays in the receipt of tax refunds. And while documents, such as the 1099 Form, will be printed and sent to individuals and companies for tax purposes, don't expect to see them ahead of government-imposed deadlines.
Additionally, audits that have been scheduled or are in process were shelved due to the shutdown, and it will take time for the IRS to work through the backlog of cases.
The shutdown has affected potential SBA borrowers, depending on their stage in the process at the time of the shutdown.
* If a candidate was approved for an SBA loan with the bank: For these business owners, the process was completed. They needed to request verification from the bank that they have received and been assigned a formal loan number by the SBA. If the bank received a loan number, then the loan request proceeded to a normal SBA closing and...