Federal funding for FY2027 runs out October 1. The House has passed a stopgap, the Senate’s version would extend current spending levels into December, and the two chambers have a narrow window of actual legislative days to reconcile them. The threat may well pass. The planning question is not whether it passes — it is what your cash position looks like in the two weeks where nobody knows yet.

The last lapse is a useful yardstick precisely because it was the worst case: 43 days, the longest in modern history, roughly $5 billion in SBA funds blocked from reaching small businesses, and more than 10,000 owners cutting hours, laying off staff or shelving expansion plans.

What actually stops

A lapse in appropriations is not a general economic shock. It is a specific set of federal functions going dark, and knowing which ones lets you skip the panic on the rest.

SBA 7(a) and 504 approvals stop. New loan processing and approvals halt. Loans already approved before the lapse continue to process and fund — the cutoff is the approval date, not the closing date. If you have a 7(a) in underwriting for an acquisition or an equipment purchase, the difference between approved and nearly approved is the whole question.

Microloans and disaster loans keep running. These are funded differently and are not affected. For a smaller working-capital need, the microloan path stays open when the 7(a) path does not.

Contract awards, modifications and payments slow or stop. New awards do not get made. Options do not get exercised. Invoices sit unprocessed because the contracting officer and the payment office are furloughed. Stop-work orders arrive on unfunded work.

Contractors do not get back pay. This is the asymmetry that catches people. Federal employees have historically been made whole when the government reopens. Firms providing services to the government have not. Revenue lost during a lapse is lost, not deferred.

The scale is worth internalising: roughly 65,500 small business contractors had close to $3 billion a week at stake during the last lapse, around $12 billion in a single month.

Which parts of a consulting pipeline are actually exposed

Most consulting firms are not federal contractors and conclude from that they are not exposed. Run the exposure test properly, because it has three layers.

Direct. You hold a prime or sub contract with a federal agency. Obvious, and usually already tracked.

One step removed. Your client is a federal contractor, a grant recipient, a university with federal research funding, or a healthcare organisation whose reimbursement flows through a federal program. When their cash stops, discretionary consulting spend is the first line they freeze — not because the engagement stopped being valuable, but because it is the easiest line to defer.

Financing-dependent. Your client’s project is funded by an SBA loan that has not been approved yet, or your own expansion is. This is the layer nobody puts on a risk register, and it is where a 43-day lapse turns a signed statement of work into a “let’s revisit in Q1.”

Go through your open pipeline and tag every deal with one of those three or “none.” The exercise takes an hour and usually surprises people — the second category is almost always larger than expected.

The moves that are worth making before the deadline

Pull forward anything approval-gated. If an SBA approval, a contract modification or a purchase order is close, the marginal value of closing it this week rather than next is unusually high right now. Say so plainly to the client; they are reading the same headlines.

Get invoices in early, not on the usual cycle. Payment offices process what is already queued more readily than what arrives mid-lapse. Invoicing a week early costs you nothing and moves you up the queue.

Model the 45-day scenario on your own cash. Not as a feeling — as a spreadsheet. Take receivables tied to exposed clients, delay them 45 days, and look at the low point. If that number is uncomfortable, the time to arrange a credit line is while the bank is calm, not during week three of a lapse.

Put stop-work language where you can see it. For federally-linked work, know who bears the cost of demobilisation and remobilisation, and what notice you are owed. If a contract is silent, that ambiguity resolves against the smaller party roughly every time.

Have the conversation with exposed clients now. A short, unemotional note — “here’s what we’d propose if funding lapses: pause these workstreams, continue these, resume on this trigger” — is a differentiator. It also means the pause decision, if it comes, is a plan you wrote rather than an email you receive.

Keep it proportionate

The base case is that a stopgap passes and none of this happens. The cost of preparing is a few hours of pipeline tagging, some early invoicing and a conversation you should probably be having anyway. The cost of not preparing, in the scenario that already occurred once, was 43 days of receivables that never arrived and no back pay to recover them.

Tag the pipeline, invoice early, model the gap. Then go back to work.