This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

How Budget Cuts Might Affect Small Businesses

Q. How will small businesses be affected?

A. In several ways. First, companies that have contracts with the government may lose business because agencies may cut all or parts of some programs. Or they may delay some work.

There's also likely to be an impact on small businesses that don't have contracts, but that do business with contractors. Some of these small businesses are subcontractors. Others are suppliers who can lose business if contractors and subcontractors pare their expenses. An example: Corporate caterers are likely to get fewer bookings for parties.

If people who work for the government or federal contractors lose their jobs or are furloughed, companies that target consumers â¿¿ retailers, restaurants and service providers like hairdressers â¿¿ can be hurt.

A study by researchers at George Mason University and the economic forecasting firm Chmura Economics and Analytics estimated that small businesses across the country would lose more than 950,000 jobs as a result of the budget cuts. More than 157,000 of those job losses would come from federal contractors, with the rest from subcontractors and companies that cater to contractors and their employees. The university is located in northern Virginia, near the nation's capital and home to many government contractors. The study was led by George Mason professor Stephen Fuller, who has studied the impact of public policy on the local economy.

It's not known how many small businesses would be hurt, or how much revenue they would lose. The Small Business Administration says that there are about 130,000 small companies that have federal contracts.

Q. Which small business contractors are most vulnerable? And where are they located?

A. It's too soon to know which companies will suffer cuts in their contracts because government agencies are still trying to determine how much their programs and contracts will be cut. But small businesses that are primary contractors or subcontractors with the Pentagon are expected to be at risk. The law calls for the Pentagon's budget to be cut 8 percent and domestic agencies' budgets to be cut 5 percent. The Defense Department has by far the greatest number of contracts, with $360.9 billion in primary contracts in the fiscal year that ended Sept. 30. In the previous fiscal year, small businesses were awarded nearly 20 percent of primary defense contracts, according to the most recent information available from the Small Business Administration.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs