The Federal Reserve has expanded its $600 billion Main Street Lending Program to serve much smaller businesses.
\nThe move comes after the Federal Reserve accepted more than 2,200 comments about the proposed lending program from people, businesses and nonprofits. The Fed has yet to set a start date, saying that will be \u201cannounced soon.\u201d
\nThe minimum loan amount under the program will now be $500,000 for new loans and priority loans, down from the originally proposed $1 million, opening up the program to smaller businesses. The \u201cexpanded\u201d loan type will be a minimum of $10 million, designed for larger businesses.
\nThe ceiling for loans will also be raised to companies with up to 15,000 employees or up to $5 billion in annual revenue, compared with original thresholds of 10,000 employees or $2.5 billion in revenue when the program was first announced. That means much larger companies will now qualify for the program.
\nThere will be a new type of \u201cpriority loan\u201d in which the Federal Reserve will buy 85 percent of the loan made by a bank, as opposed to the 95 percent the Fed will buy through its Main Street New Loan Facility and Main Street Expanded Loan Facility, announced earlier this month.
\nAll the loans will be for four-year terms with an adjustable rate of the London Interbank Offered Rate, or Libor, plus 3 percent,which means a range of around 2.5 percent to 4 percent, with interest and payments deferred for a year.
\nCompanies that have received funding from the Small Business Administration\u2019s Paycheck Protection Program can still be eligible for Main Street funding provided they meet the latter program\u2019s criteria.
\nFor qualifying businesses, the process is the same as with the PPP: Go through partner banks to either take out new Main Street loans or receive boosts to existing loans. The businesses must \u201ccommit to make reasonable efforts\u201d to maintain staffs and payroll.
\nThe Main Street Lending Program is funded by $75 billion from the $2.3 trillion CARES Act and is part of a larger $454 billion in CARES Act funding earmarked for the Fed to help backstop programs meant to help businesses. The money bolsters the Fed\u2019s ability to add credit to the existing monetary system, thus increasing the overall amount of dollars available to lend.
\nThe other Federal Reserve programs include a loan facility for the PPP to allow banks to lend more to their customers by using existing loans as collateral for fresh money, as well as a new Municipal Liquidity Facility that will buy up to $500 billion in state and local government debt to allow them to continue to borrow at reasonable rates and avoid drastic cuts in services and jobs.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Federal Reserve has expanded its $600 billion Main Street Lending Program to serve much smaller businesses. The move comes after the Federal Reserve accepted more than 2,200 comments about the proposed lending program from people, businesses and nonprofits. The Fed has yet to set a start date, saying that will be \u201cannounced soon.\u201d The […]<\/p>\n","protected":false},"author":196,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-34842","post","type-post","status-publish","format-standard","hentry","category-business-news"],"yoast_head":"\r\n