The recent government shutdown, the longest in U.S. history, has had a profound impact on small businesses and federal contractors. With the Small Business Administration halting $2.5 billion in loans for 4,800 small businesses and $24 billion in federal spending on goods and services suspended in the first month alone, the effects have been devastating.

Many small businesses were cut off from essential government-backed loans and new federal contracts, jeopardizing day-to-day operations and expansion plans. Contractors faced stalled projects, furloughs, and layoffs due to interrupted payments, resulting in cash flow disruptions that cascaded into the private sector and local economies. 

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Minority- and women-owned small businesses in the technology sector are particularly vulnerable during such shutdowns. These businesses already face persistent barriers such as limited access to capital and funding, with minority entrepreneurs and women receiving disproportionately fewer loans and higher interest rates. Gender bias, discrimination, and underrepresentation further impede their growth, affecting networking opportunities, mentorship, and leadership advancement.

The shutdown exacerbated these challenges, as government agencies that support these businesses, such as the Minority Business Development Agency (MBDA) and the Community Development Financial Institutions (CDFI) Fund, are frozen or defunded. 

What Do the MBDA and the CDFI Fund Do?

Government agencies like the MBDA and the CDFI Fund play a crucial role in supporting economically disadvantaged entrepreneurs by providing targeted financial resources, technical assistance, and access to critical business networks. Programs such as the Capital Readiness Program and Women’s Entrepreneurship Program offer mentorship and capacity building, while the CDFI Fund empowers local financial institutions to provide affordable loans, grants, and technical assistance in low-income and minority communities, effectively bridging gaps where traditional financing is unavailable. 

The Shutdown’s Long-Term Damage

The shutdown has not only caused immediate financial distress but has also eroded trust in the government as a reliable partner in economic growth. The Senate-passed bill to reopen the government aims to stabilize critical sectors by restoring pay for furloughed workers and reversing aggressive reductions in force. However, the near-term costs of the shutdown cannot be undone, and the political roots of this crisis threaten an even steeper economic cliff ahead. The longer-term costs stem from the Administration’s ongoing willingness to use government funding as leverage in ideological battles, which could further disrupt economic stability. 

For socially and economically disadvantaged individual (SEDI) business owners, government contracts and agency support often determine whether a business grows or collapses. The shutdown highlighted the fragility of these businesses and the urgent need for a government that actively supports inclusive economic growth. Strengthening agencies like the MBDA and the CDFI Fund is crucial to repairing the social contract and ensuring that economic opportunities reach every community. 

Trust in the Government Must Be Restored

The economic impact of the shutdown extends beyond immediate financial losses. It disrupted the momentum of innovation and productivity, particularly for SEDI businesses that have been under siege this past year. Further disruption could eclipse the shutdown’s $14 billion in permanent losses many times over, breaking the backs of businesses and workers. Restoring trust in the government’s ability to act as a consistent economic partner is therefore essential. 

Now that the government has reopened, the next step must be an act of renewal rather than a simple return to business as usual. Restoring and strengthening agencies like the MBDA and the CDFI Fund is essential to repairing the social contract and rebuilding an economy that works for all.

The shutdown underscored the importance of a government that actively promotes inclusive economic growth and ensures that opportunities are accessible to every community. By addressing the systemic barriers faced by minority and underserved business owners, federal policymakers can help drive both individual business growth and broader economic equity across the United States. 

Dedrick Asante-Muhammad is President of the Joint Center for Political and Economic Studies.