Federal Reserve Expands Paycheck Protection Program to Add More Lenders
WASHINGTON – The Federal Reserve said Thursday it is expanding a program that helps the government provide stimulus loans to small businesses and is designed to keep workers on payrolls during the coronavirus pandemic.
In a brief statement on its website, the central bank said it broadened access to its Paycheck Protection Program Liquidity Facility to additional lenders such as non-depository institutions.
The Fed also widened the collateral that can be pledged.
“The changes will facilitate lending to small businesses via the Small Business Administration’s Paycheck Protection Program,” the statement said.
The Small Business Administration on Monday relaunched its Paycheck Protection Program, which was intended for small businesses to get loans of up to $10 million that convert to grants if a company uses the proceeds to keep workers employed.
The Paycheck Protection Program is doling out an additional $320 billion approved by Congress, after an initial round of $349 billion was exhausted on April 16 after just 13 days.
As a result of the changes made by the Fed, all Paycheck Protection Program lenders approved by the SBA, including non-depository institution lenders, are now eligible to participate in the central bank’s Paycheck Protection Program Liquidity Facility.
SBA-qualified PPP lenders include banks, credit unions, community development financial institutions, members of the Farm Credit System, small business lending companies licensed by the SBA, and some financial technology firms.
When the Paycheck Protection Program Liquidity Facility was announced, the Federal Reserve said the facility would immediately lend to depository institutions and that non-depository institutions would be added as soon as possible.
Additionally, eligible borrowers will be able to pledge whole PPP loans that they have purchased as collateral to the PPPLF.
An institution that pledges a purchased PPP loan will need to provide the Reserve Bank with documentation from the SBA demonstrating that the pledging institution is the beneficiary of the SBA guarantee for the loan.
The Trump administration on Thursday limited to $20 million the value of loans that corporate groups can get from the program after outrage over reports that large companies and brand-name chains got funds.
It also laid out criteria allowing non-bank lenders to handle loans to ensure “broad and diverse” lender participation.
In The News
WASHINGTON -- Economists warned Congress Tuesday of long-term damage to the U.S. economy if the coronavirus pandemic is not brought under control soon. They cautioned during two separate congressional hearings that the slow improvement to the economy since the pandemic hit the United States eight months... Read More
WASHINGTON — Treasury Secretary Steven Mnuchin, Federal Reserve Chairman Jerome Powell and representatives from both parties agreed on at least one point at a hearing Tuesday: The economy needs more relief from Congress to sustain the recovery from the coronavirus. Despite that broad consensus, Congress, paralyzed... Read More
WASHINGTON — Emergency expansions to Unemployment Insurance provided critical support to workers across the country during the early months of the pandemic. But the major component of these expansions, an additional $600 in weekly benefits, expired at the end of July. With lawmakers continuing to be... Read More
WASHINGTON — Some House Democrats are keeping pressure on House Speaker Nancy Pelosi to bring a new coronavirus relief bill up for a vote next week as they look to signal to voters that the party is pursuing a deal to bolster the economy. Pelosi said... Read More
The Federal Reserve left interest rates near zero and signaled it would hold them there through at least 2023 to help the U.S. economy recover from the coronavirus pandemic. The Federal Open Market Committee “expects to maintain an accommodative stance of monetary policy” until it achieves... Read More
WASHINGTON — Speaker Nancy Pelosi on Tuesday headed a call from her members to commit to keeping the House in session until there’s a coronavirus relief deal, but the vow does little to break the stalemate in bipartisan negotiations that is at the heart of Democrats’... Read More