AICPA pushes Fed, Treasury for new lending facility for small biz

The American Institute of CPAs has organized a coalition of 21 business trade groups, including the National Association of Manufacturers, the U.S. Chamber of Commerce and the National Retail Federation, to urge the Federal Reserve and the Treasury Department to provide a new lending facility to small businesses for short-term liquidity needs in the midst of the novel coronavirus pandemic.

The facility would differ from the Small Business Administration’s Paycheck Protection Program, which Congress voted to extend last week, and the Federal Reserve’s new Main Street Lending Program, which became fully operational Monday. It would be aimed at small businesses that have immediate cash flow needs during the COVID-19 pandemic, such as from unpaid accounts receivable, or from credit issues that are keeping them from getting inventory from their suppliers.

The AICPA and the other members of the coalition sent a letter last week to Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell asking them to set up such a facility to provide help to small businesses facing short-term liquidity and credit problems.

They noted that many small businesses are experiencing a slowdown in accounts receivable payments, from 30 to 90 days or more. They are also having a hard time forecasting cash flows, harnessing enough cash and maintaining short-term assets, such as inventory, to continue operations. Many suppliers are limiting the normal flow of goods to buyers as they too face economic uncertainty and are hesitant to offer the usual credit terms to businesses.

“The Federal Reserve, with the approval of the Treasury Department, already has the authority to create a lending facility to help small businesses with their short-term liquidity issues. Importantly, the Treasury Department can tap into the remaining approximately $200 billion of unused CARES Act funds to provide support for these businesses,” said AICPA president and CEO Barry Melancon in a statement Monday. “Unfortunately, existing lending programs, such as the Paycheck Protection Program, Economic Injury Disaster Loan and Main Street Lending Program, provide limited assistance to businesses facing liquidity and credit risks. The PPP is primarily focused on helping businesses with their current payroll needs and does not address ongoing cash flow issues, while EIDL and MSLP are longer-term solutions that don’t specifically address these short-term and immediate problems.

The AICPA and the other trade groups in the coalition predict that short-term liquidity issues will continue after the pandemic subsides. “Furthermore, short-term liquidity problems will impact individual businesses on a revolving basis, potentially impacting every contract and supplier transaction for the next 12 to 18 months,” they wrote.

Even though the Paycheck Protection Program has just been extended until Aug. 8, data on the loans released Monday by the SBA revealed that many didn’t go to the small businesses that were supposed to be the main recipients of the aid. Instead, many loans went to companies owned by private equity and venture capital firms, hotel and restaurant chains, businesses owned by celebrities, billionaires, members of Congress and the Trump family.