After six weeks of political gridlock in Washington, the federal government has officially reopened, but the damage to small businesses across the country is significant. Tom Sullivan, vice president of small business policy at the U.S. Chamber of Commerce, joins us on the latest episode of the U.S. Chamber of Commerce Small Business Update to discuss the economic toll and why Congress must ensure a repeat shutdown doesn’t happen again in early 2026.
Sullivan said that the shutdown froze roughly $5 billion in Small Business Administration (SBA) loans and delayed $18 billion in federal contract payments to 6,500 small government contractors. According to the Congressional Budget Office, the shutdown reduced fourth-quarter GDP by 1.5%.
“To delay [money] for six weeks was a punch in the gut not only for Main Street, but also for the U.S. economy.”
The SBA, led by Administrator Kelly Loeffler, was unable to approve new loans during the closure, stalling an average of $850 million in financing each week. Sullivan said the situation was devastating for entrepreneurs who had already spent weeks or months securing approval.
Prior to the shutdown, small business momentum had been improving following July’s passage of tax reform measures that permanently lowered rates and doubled the limit on expenses for equipment and capital investments. These changes were expected to support reinvestment and allow firms to plan for 2026. However, the shutdown interrupted that trajectory, creating uncertainty and financial strain during a critical quarter.
Heading into the holiday season, small businesses are facing intensified pressure to make up lost revenue, particularly during Small Business Saturday and other peak shopping periods. Sullivan notes that retailers are adjusting by offering promotions and leveraging inventory to maintain cash flow. Meanwhile, the Chamber continues to encourage consumers to support local businesses, emphasizing the direct impact of local spending on jobs and community resilience.
Despite the challenges, the Chamber maintains that now remains a viable time to start a small business. The flexibility and adaptability of small firms, especially in uncertain economic conditions, can be an advantage. The organization also recommends that entrepreneurs use the resources offered by both the U.S. Chamber and local chambers of commerce, which provide networking, training, and policy advocacy.
Ultimately, Sullivan stresses the importance of avoiding future shutdowns, warning that additional disruptions to government operations could exacerbate uncertainty and undermine Main Street growth. Advocates are calling on lawmakers to stabilize funding and ensure the government remains operational when temporary spending measures expire early next year.
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