The Federal Reserve will launch the Main Street Lending Program, which is geared toward mid-sized businesses, this week. By contrast, the Paycheck Protection Program (PPP) loans were designed to help the smallest companies in the nation survive the pandemic, Marketplace reported.
The name could be a bit confusing when examining the details of the effort. Loans, for their part, will run between $500,000 and $25 million, and companies with up to 15,000 staffers can apply.
Federal Financial Analytics Managing Partner Karen Petrou said, per the report, “It’s only the ‘Main Street’ program if the Main Street in your town looks a lot like Park Avenue. Small grocers, cafes, restaurants, hairdressers, car repair shops — many of them never see a half a million dollars in annual revenue, let alone could pay back a loan that big.”
The Fed is said to be charging higher interest than the PPP initiative, and the debts are non-forgivable. Companies also have four years to pay the debts, but Bank of Southern California CEO Nathan Rogge said, per the report, that the window doesn’t provide sufficient time for a number of his customers.
While Congress dedicated nearly $700 billion for the PPP, there essentially will not be a cap on the program, per comments from Fed Chair Jerome Powell. The Federal Reserve, as well as The Treasury, would just increase the amount of resources available.
In April, news surfaced that The Federal Reserve was almost ready to introduce the lending program and was asking financial institutions for advice. The Fed has been seeking assistance from retail, reserve and investment banks. At the time, it was noted that the Fed has taken in more than 2,200 pieces of feedback through the web.
The pandemic has put the Fed in a unique position: Instead of focusing on its typical goals of maintaining high employment rates and keeping the economy stable, it is now looking at lending directly to businesses.