The White House and Republicans have yet to reach a debt ceiling deal, and the possibility of a US Default looms on the horizon. Business owners, along with the rest of the country, are cautiously waiting, bracing for a possible recession and job losses in the event of a prolonged default in 2023.

Some of the people who’ll be immediately impacted if the U.S. defaults on its debts are:

1. Veterans
2. Retirees
3. Would be home buyers

What can be done to handle the US debt default crisis?

Economic impact of US default is going to be massive. Companies across varied areas will be impacted by US default. To help protect themselves, companies should evaluate their exposure to government contracts, consider holding onto more cash and offloading short term Treasury bills that mature within a year, according to experts.

“We all hope that we don’t default. But hope is not a plan”, said Joshua White, assistant professor of finance at Vanderbilt’s school of management. “Companies need to have a plan.”

As stated companies need plan to handle a debt default and follow few steps to prepare for a potential default.

Figure out exposure to government funds

Those companies that have contracts with the government could see delays in their payments as soon as the US runs out of cash. Making contingency plans becomes the need of the hour. Companies in those industries, especially, hold regular meetings to figure out a plan in case payments are delayed. The government will eventually work it out,” but until then, companies need to know, can we last until that point and how long would that be?

Hold more cash

Even businesses without direct exposure to government funding should have a plan. If your customers or suppliers aren’t getting paid, chances are they’ll pull back on spending or may run into their own disruptions that could impact your business.

Smaller businesses might want to consider holding onto more cash, and perhaps diversify into holding non US currencies in case the value of the dollar falls.

Offload some Treasury bills

Just as banks will likely be mindful of their government bonds, same goes for the companies that hold Treasury bills. Companies in that situation who need their payment immediately might consider placing that money into an FDIC insured account instead of risking a delayed payment.

Get back to basics

Cynthia Franklin, director of entrepreneurship for the W. R. Berkley Innovation Labs at New York University, “If there were a default on the US debt, it would make borrowing costs higher, it would mean consumer confidence might go down,” she said. “There are a lot of areas where it would be appropriate for a company to do a little belt tightening.” But, she noted, “that’s just what a business should do anyway.”

In short, not to rely too heavily on one source of income and companies should also be as efficient as possible so they’re not spending more than they need to.

How is Wall Street preparing?

The financial market is preparing itself for a response to US default. Banks, brokers and trading platforms are prepping for disruption to the Treasury market, as well as broader volatility.

Big bond investors have cautioned that maintaining high level of liquidity was important to withstand potential violent volatility, and to avoid having to sell at the worst possible time.

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