The Federal Reserve’s new Main Street Lending Program announced Thursday will make as much as $600 billion in loans available to small- and medium-sized businesses as part of a new $2.3 trillion package designed to boost the US economy in the wake of the devastation wreaked by the coronavirus.
That is a significant boost to capital being made to small businesses through the Paycheck Protection Plan as signed into law by President Trump. It’s currently capped at $349 billion but discussions are underway to add another $250 billion. The program, launched through the Small Business Administration, has been criticized for technical and other challenges since its launch April 3.
The Main Street lending program “will make a significant difference for the 40,000 medium-sized businesses that employ 35 million Americans,” Treasury Secretary Steven Mnuchin said, according to The Associated Press.
Firms seeking Main Street loans “must commit to make reasonable efforts to maintain payroll and retain workers,” the Fed said in the announcement.
Loans can be made through “U.S. insured depository institutions, U.S. bank holding companies, and U.S. savings and loan holding companies,” the Fed said.
Loans range from a minimum of $1 milltion to $25 million.
Here are some of the highlights:
- The Main Street Lending Program will enhance support for small and mid-sized businesses that were in good financial standing before the crisis by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion.
- Principal and interest payments will be deferred for one year.
- Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses.
- Banks will retain a 5 percent share, selling the remaining 95 percent to the Main Street facility, which will purchase up to $600 billion of loans.
- Firms seeking Main Street loans must commit to make reasonable efforts to maintain payroll and retain workers.
- Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act.
- Firms that have taken advantage of the PPP may also take out Main Street loans.
- Each Eligible Borrower must be a business that is created or organized in the United States or under the laws of the United States with significant operations in and a majority of its employees based in the United States.
Read full details of the loan program in this Federal Reserve document.