The Federal Reserve is extending its $600 billion Main Street lending program to reach small and medium-sized businesses (SMBs) hit by the coronavirus pandemic, the central bank said Thursday (April 30).
As a way to get money into the hands of more businesses, the Main Street loan program has extended the rules to include SMBs with up to 15,000 employees and $5 billion in revenue.
The Federal Reserve developed the loan program to assist SMBs that were economically stable prior to the global coronavirus pandemic. The Fed asked for input from individuals, businesses, and nonprofits regarding how the program should be developed in order to meet the varying needs of businesses.
The extension was developed based on input from over 2,200 letters it received about the program. As a result, The Fed enhanced loan options and upped the size of eligible SMBs. The program now includes a third loan option with risk-sharing; dropped the minimum loan to $500,000 from $1 million; and increased the number and types of businesses eligible to apply.
The original two loan options introduced included one for new debt and one for existing loans. Each required banks to retain 5 percent of loans sold to the Fed. The third loan option requires banks to keep 15 percent of loans that “when added to existing debt do not exceed six times” a borrower's adjusted income.
The Treasury is providing $75 billion for the program using funds from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Fed is also evaluating a separate avenue to help nonprofit organizations “meet their unique needs.”
The Fed announced earlier in April that it would offer as much as $2.3 trillion in loans for SMBs, households and local governments through a series of new and expanded programs.
Within the $2.3 trillion package, the Fed said it would buy bonds issued by states and local governments.