Treasury and Federal Reserve Must Create New Lending Facility to Help Small Business, Says Coalition of 21 Leading Retail, Manufacturing and Business Associations

July 1, 2020

WASHINGTON, DC, (July 1, 2020) – A coalition of associations representing a cross-section of businesses are calling upon the Department of the Treasury and the Federal Reserve to use their existing authority to create a lending facility to provide relief to companies that are facing short-term liquidity issues. The coalition, led by the American Institute of CPAs (AICPA), includes the National Association of Manufacturers, U.S. Chamber of Commerce, National Retail Federation, C2FO, the American Apparel and Footwear Association and 15 more organizations. 

In the July 1 letter, the coalition said that COVID-19 has created acute liquidity risk for small businesses – from manufacturers to retailers to service providers – that is resulting in constriction throughout supply chains. In addition, the coalition stated that extraordinary economic conditions around the world are creating more credit and liquidity challenges for companies, such as:

  • A slowdown in accounts receivable payments, from 30 to 90 days or more.
  • Difficulty forecasting cash flows, harnessing sufficient cash and maintaining other short-term assets, such as inventory, to continue operations.
  • Suppliers’ limitations on the normal flow of goods to buyers.
  • Suppliers’ hesitancy to offer typical credit terms because of the U.S.’ extraordinary economic conditions.

“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 Barry Melancon, CPA, CGMA, president and CEO of AICPA. “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 its coalition partners also predict that short-term liquidity issues will continue beyond the duration of the pandemic. The letter also states, “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.”

Jason Brodmerkel, CPA, senior technical manager of AICPA Accounting Standards —Depository and Lending Institutions, added, “Even with the possibility of an extension of the PPP and a new financial relief package later this year, small businesses facing liquidity challenges have few options. This is the perfect time for Treasury and the Federal Reserve to act.”