It will now be a lot easier for schools, hospitals and social service organizations to access funds using the Main Street Lending Program.
The initiative, crafted by the Federal Reserve Board, is designed to provide loans to businesses to help them cope with the financial stresses of the COVID-19. It was funded with $75 billion from the CARES Act.
Based on feedback from the public, the minimum employment threshold for nonprofits was lowered to 10 from 50, the limit on donation-based funding was eased and some financial eligibility requirements were adjusted to accommodate more charities.
Nonprofits will be eligible for two loan options, one for a minimum of $250,000 and a second for $10 million.
The Main Street nonprofit loan terms are generally similar to for-profit business loans, including the interest rate, principal and interest payment deferral, five-year terms, and minimum and maximum loan sizes. Principal payments will be deferred until year three, and interest payments until year two.
“Nonprofits provide vital services across the country and employ millions of Americans,” said Federal Reserve Chairman Jerome Powell in a statement. “We have listened carefully and adapted our approach so we can best support them in carrying out their vital mission during this extraordinary time.”
Nellie Liang and William English, who once led the Fed’s divisions of financial stability and monetary affairs, suggested bank fees be increased to encourage more banks to participate. They also recommended extensions to the terms and incentives for those who repay their debts early.
Earlier this month, the Fed issued a state-by-state listing of lenders that are accepting applications from new business customers for the program. To support a variety of businesses, the loans range in size from $250,000 to $300 million. Business borrowers must apply for program loans through a participating lender.
While the Main Street Lending Program is geared toward mid-sized businesses, the Paycheck Protection Program (PPP) loans were designed to help the smallest companies in the nation survive the pandemic.