In early April 2020, the Paycheck Protection Program was established to help support small businesses suffering at the hands of the coronavirus pandemic. But the $349 billion originally allotted to the fund quickly dried up. According to Carl Peterson, AICPA’s vice president of small firm interests, additional funds need to be made available as soon as possible, and the timing of the eight-week payroll support needs flexibility.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

When the Paycheck Protection Program was established in early April, it allotted $349 billion for small businesses affected by the coronavirus. How well has it been working? Well, here we stand before the month is closed out and the funds are practically dried up with small businesses in dire need of help to survive the pandemic. The AICPA believes it is time to make funds available while also adding flexibility into the timing of eight-week payroll support. To discuss the situation, today we are here with Carl Peterson, AICPA's vice-president of small firm interests.

Can you give us some background on the paycheck protection program, what its purpose is and whether it seems at this point to be achieving its mission?

[Peterson] I think the official reason is actually to protect employee payroll, save their paychecks. But the real purpose I think behind it was really a lifeline in a sense to saving small businesses and their employees. I mean, thinking about the emotional well-being of an employee who isn't laid off or furloughed is so much better and they'll be ready to come back to work. So, with the payroll projection program, it was really a lifeline in many ways.

But you asked about did it achieve its mission. We hear the sensational stories about it, but I think for many small businesses it is achieving its mission, and I think those stories are going to come out at some point.

What about the fact that the initial $349 billion pool of funds is pretty much dried up? What does that say about the effects of this pandemic?

[Peterson] The impact of this pandemic is so widespread. It's hard to imagine that not a single company is adversely affected, if not at the beginning of the crisis, they are now feeling its impact with less buyer traffic, less revenue, additional cleaning costs, and staff just unable to come to work. Almost every state has a shelter-in-place law right now.

And when the loan application process became available, not all businesses had necessarily incurred large losses yet, but the fear of what could happen, what could be the unknown, I think forced businesses to apply, and then with the funds gone in less than two weeks, you know how impactful this crisis is in our lives and in our businesses. It's pretty amazing.

How important is it for additional funds to be made available? And is there a number that the AICPA has in mind as far as how much would be necessary or what would work?

[Peterson] Well, additional funds needs to be made available, with the priority that with the funds, whatever number they come up with, the priority going to the gig workers, the other independent contractors to have a lifeline, an opportunity for the same funding as was given in the first round.

Is there a number? Well, they're talking about, what, $250 billion today? And I'm sure that will go fast if that's the number. But I wish I knew the magic number. I don't know what that magic number is, but $250 billion's a good start.

Another aspect of the program is the eight-week payroll support. The AICPA believes it needs to be addressed. Why do we need some flexibility there?

[Peterson] This became an issue early on in the program. There's probably an expectation, I think, that businesses would be able to start opening up in just a few weeks, but we know that didn't happen.

There's certain industries like bars and restaurants that are shut down and can only do take-out service. And while we always hear about the bars and restaurants, it's not just them. There are other industries that are impacted by this eight-week rule where we need some flexibility.

When shelter-in-place is lifted, it's not like there's going to be this light switch and everyone is going to be able to open their doors, and not all buyers are going to come rushing out and spending money. In fact, a lot of the buyers have been living on unemployment. So how can they spend money right away?

I think local, small businesses, they're going to be shut down probably some more, depending on the state, and the program requires these businesses to spend the money within eight weeks of receiving it. Some already are into week two, they may be shut down some more yet.

So if they spend the money during the shutdown on payroll and all the eligible costs and then they can't open up until week eight, then what? They're not going to have the operating capital and they're going to be forced to close.

I think when anybody really looks at, I'm shelter-in-place, my business is closed, and I don't care if you're a bar or restaurant, when the shelter-in-place is lifted, am I going to have any funds left to open my doors? I don't know. It's a good question. I think a lot of people are going to have a difficult time ramping up and being ready to go. So, I think if we had the flexibility on the eight weeks, it would make a lot more sense.

Why, just for some greater context here and people may not understand this a 100%, is it that small businesses are so important to the health of our economy? Why is it so important that this program be successful and that these businesses are able to get back on their feet? Not only for themselves but for the health of the economy.

[Peterson] It's interesting. Small businesses are really the lifeline, I think, to our everyday lives. I've read a report – the SBA has their 2019 reports by state – identify how many small businesses that are, and they define those by the way of being businesses that have less than 500 employees, which kind of ties into the whole concept of the PPP program and where they set the limits for businesses in the size, too, with the application process.

But the reports for 2019 say there are over 30 million small businesses with less than 500 employees each. Out of that, I think there are actually like 6 million gig workers, independent contractors, the people that you and I live with and know in our communities and neighborhoods.

So, I think small businesses really, it is mainstream. I mean, they employ almost 60 million individuals according to the SBA. Small business will keep communities thriving every day and I think not only do they support the financial well-being of society, but the mental health of our communities and neighborhoods.

And if we're going to see a faster ramp-up of getting out of this recession that we're probably in, hopefully we don't go down to a depression, and we keep having greater unemployment and more businesses shutting down that are not going to be able to open up, it's going to be tough.

But if we get the small businesses going, that's where the activity happens. That's where communities and happy neighborhoods and happy people are going back out and saying, OK, I'm free to do something. Let's go spend some money. Let's take that vacation. Let's go on that trip. Let's meet our friends at the bar on Friday night.

I think that small businesses need to be the first business to get back on their feet. Otherwise, the flow of money into the system is going to be slow to come, and we know that's not good for the economy.