The Federal Reserve said it would offer as much as $2.3 trillion in loans aimed at shoring up small to mid-sized businesses, U.S. households and local governments through a series of new and expanded programs aimed at battling the continuing effects of the coronavirus.
Four-year loans would be offered through banks for companies with as many as 10,000 employees, reported Reuters.
Within the $2.3 trillion package, the Fed said it would buy bonds issued by states and local governments.
In a statement accompanying the announcement, Fed Chairman Jerome Powell said that “our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus. The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”
In a nod toward the economic pressures faced by smaller firms across the U.S., the Fed also said it will support as much as $600 billion in loans slated for small to mid-sized businesses as part of the Main Street Lending Program. As reported by The Wall Street Journal, the $75 billion in funding from the Treasury will now be expanded to the recent $600 billion tally, targeting companies with up to 10,000 workers but less than $2.5 billion in the top line.
The program, in conjunction with the Treasury, is slated to be finalized next week. Banks would disburse the loans, which start at $1 million. The banks will retain 5 percent of the loans, which feature interest-deferred payments for a year, and sell the remainder to a Fed-established facility.
The Fed also said it would backstop loans generated under the Paycheck Protection Program (PPP). In reference to funds targeting governments, the Fed will support the purchase of as much as $500 billion in short-term notes bought directly from states, counties and cities.
The Fed’s moves come as U.S. Treasury Secretary Steven Mnuchin said yesterday that smaller firms should not worry about being unable to get funding from the government bailout as they struggle to stay afloat during the freefall due to COVID-19.
“I want to assure all small businesses out there: We will not run out of money,” he told CNBC on Wednesday (April 8). “If you don’t get a loan this week, you’ll get a loan next week or the following week. The money will be there.”
As reported in this space, and as detailed this week in the PYMNTS report Main Street on Lockdown, which surveyed more than 200 SMBs on March 24, there was only enough cash on hand to get through the next 20 days before having to tap into additional means of funding, such as through personal credit lines or loans (such as the ones on offer through the $349 billion program that went live last week).