Clients and CPAs can benefit from a 100% forgivable loan

Shutterstock_551991082As companies struggle with the economic uncertainty caused by the COVID-19 pandemic, small businesses — the backbone of the economy — have the power to pave a path toward economic recovery. They can do that, in part, by keeping their staff employed or by rehiring them if already laid off or furloughed.

New legislation has given them the power to do that.

CPAs can reap many benefits for helping clients apply for newly available loans under the Paycheck Protection Program (PPP), a joint effort by the Department of the Treasury and the U.S. Small Business Administration to provide small businesses with $349 billion in forgivable loans for keeping or rehiring employees and to cover certain other expenses.

Here’s why CPAs helping clients understand and take advantage of the PPP is in everyone’s — and notably in theirbest interest.

Getting back up to speed

Without healthy workers who have remained on sound financial footing, it will be more difficult for the economy to rebound once the coronavirus crisis is over. Clients who keep or rehire employees will benefit for many reasons:

  • It will be easier for businesses whose profits have dwindled or been cut off completely to get up and running quickly if their experienced people are ready and able to get back to work as soon as they’re needed.
  • Companies will avoid the unnecessary expense of finding and training new people at a time when profits are still slowly returning to past levels.
  • New employees will lack familiarity with company practices and procedures, which can hinder efficiency and productivity. Perhaps more importantly, they will not have the same customer relationships that the business has built over time.
  • Owners of essential businesses who don’t need to be fully staffed can redirect employees to other tasks, including analyzing opportunities for greater efficiency or new business. They are likely to be highly motivated to contribute during a crisis and to gain new experiences.

Considering cash flow

Since cash flow is a top concern for clients right now, CPAs can explain how the new program can reinstitute strong cash flow sooner once they are back in business:  

  • The compensation received through the program is paid by tax-free money and is tax deductible.
  • It is possible that participating in the program will create a net operating loss that can be carried back up to three years, to a time when the business was profitable. That allows the client to recapture tax dollars and propel them back into the business.
  • With employees ready to work as soon as restrictions are lifted, the company will be well positioned to begin earning immediately.

Benefiting all

CPAs help clients implement smart business decisions every day — making sure they benefit from the opportunities available to them is part of that tradition.

You can apply for your own PPP loans to maintain staff. If your business has slowed due to client shutdowns, you can put your staff to work assisting clients who are applying for loans. Your PPP loan will front payroll costs without having to charge your clients. And in some cases, you will be the recognized agent, eligible for the SBA agent fee paid by the lender.

Helping clients with PPP loans is very much in your firms’ interest. Ensuring that clients can make a smooth transition back to full service once the crisis is over will help them stay in business and will strengthen your firms’ future viability. It will solidify your role as their trusted adviser and enhance client loyalty. Additionally, your relationship with local banks will be enhanced as you help clients navigate the application process.

The mental health benefits for all of us cannot be overstated. Employees — of our clients’ businesses and our firms — will find it easier to handle the isolation of staying home if they are being paid and being productive. And we’ll all have a better chance of returning to normal if the disruptions we are facing are minimized as much as possible.

The Paycheck Protection Program can be used to limit those disruptions, and CPAs can help clients make the program successful.

For more help during the pandemic, turn to the AICPA’s Paycheck Protection Program resources page and the AICPA Coronavirus (COVID-19) Resource Center.

 Carl Peterson, CPA, CGMA, Vice President - Small Firm Interests, Association of International Certified Professional Accountants