What CPAs Can Do for Small Business Clients Nowby
The speed and scope of the impact of COVID-19 has upended even extremely successful small businesses. But most of them just need some breathing room to weather this difficult time and resume operations once the pandemic passes.
The pandemic has impacted all businesses, but small businesses in particular are facing a serious cash flow crunch. Their ability to meet their payroll and other financial obligations has drastically slowed or shuttered their operations. So how can CPAs help, outside of loan advice?
In my role, I speak with hundreds of CPAs firms of all sizes across the country each year. I know first-hand that CPAs are in the prime position to help their small business clients navigate the multiple options available to them to acquire short-term funding and remain operational.
CPAs understand balance sheets and income statements, know financial histories and what small businesses need to continue to succeed. That’s why your small business clients have been working with you to put plans in place to meet their immediate needs.
The Federal Paycheck Protection Program (PPP) is a great option for small businesses that need cash to stay in business during these difficult times. The American Institute of CPAs has advocated for a simple, efficient process to disburse funds so workers could remain on payroll and ensure businesses are positioned to get up and running quickly when it is safe to do so. As the program ran out of funds, we have been vocal about the need for additional funds (which, hopefully will be coming soon).
The PPP program is ideal because it provides funding quickly, within 10 days of approval, to cover payroll, utilities and rent or interest on a mortgage. And the PPP loans are forgiven if a business maintains headcount on June 30 and meets certain other requirements, providing organizations what is essentially a free lifeline through these unprecedented times.
Beyond the PPP
For those clients who did not qualify for PPP funds, were not successful in obtaining a PPP loan or who need funding in addition to the PPP, there are still other options available to keep a business alive during the pandemic and help them resume full operations quickly and easily once the pandemic ends and life returns to normal.
The first option is the Small Business Administration (SBA) Economic Impact Disaster Loans (EIDL). This program currently provides small businesses impacted by COVID-19 emergency advances up to $10,000. The funding is based on the number of employees a business has and can cover operation costs, including payroll, rent, and inventory. In fact, this is a particularly useful option for some small businesses to supplement their PPP funding, which is limited in what it can fund.
The EIDL is a fairly simple loan process, and businesses can apply on the SBA website. What makes this loan so attractive are its terms, as it is a 30-year loan at 3.75 percent.
During normal times, it takes 3-5 days for approval, then about three weeks for funding to come through. However, there has been extreme demand for assistance to small business and the EIDL has limited funds, much of which were been provided through emergency advances.
CPAs should monitor the developments of any additional funding bills being debated by Congress, as there has been talk of including additional funds for the EIDL. As these loans are processed on a “first come, first served” basis – time is of the essence.
2. Express Bridge Loans
CPAs can also point clients to other resources available through the Small Business Administration. The SBA offers Express Bridge Loans of up to $25,000 to businesses with an existing relationship with an SBA Express Lender. This loan can carry a business until it receives EIDL funding.
The Service Core of Retired Executive (SCORE) program offers funding grants to some participating operations. The SBA has several programs and grants specifically for women-, minority- or veteran-owned businesses. The local SBA service center will have more details and can confirm if your clients qualify.
4. Other Alternate Means
There are also several tax incentives and credits to consider when helping small businesses through this time, such as the employee retention credit, payroll tax deferrals, net operating loss carrybacks, acceleration of alternative minimum tax credits or increased percentage of leasehold improvements available for accelerated depreciation. Some of these options are not available to those who have received PPP funding, but CPAs can advise their small businesses clients on which, if any, are appropriate options.
CPAs can also work with small business clients to find other means for accessing capital or reducing their current costs. For example, look to see how much can be saved on utility and rental costs, such as reduced internet service or temporarily halting television services.
One area that many CPAs are helping their clients with is negotiating with their client’s landlords or mortgage holders to discuss deferring rent or principal payments. Yes, this will increase costs later on, but it may be enough to allow the business to survive in the near term, and this can be built into long term plans for the business.
Lastly, CPAs can help small businesses start developing plans to manage this pandemic and resume operations once things begin to reopen. This is a tough time and things may seem bleak for some business owners. But as CPAs, we can help them take a breath, see the big picture and start making a plan for a comeback.
The AICPA has compiled extensive resources to help firms navigate the coronavirus pandemic and better assist their clients.
Carl Peterson, CPA, is Vice President of Small Firms at the American Institute of CPAs. In this role, he serves as the small firm advocate and representative for the profession. He meets with small CPA firms regularly to understand their issues and represent these firms from an advocacy and firm development perspective.