Federal Reserve Expands Scope of Main Street Lending Program

May 1, 2020 by Dan McCue
The Federal Reserve (Photo by Dan McCue)

WASHINGTON – The Federal Reserve said Thursday it is expanding the scope and eligibility for the Main Street Lending Program, a vehicle created to help credit flow to small and medium-sized businesses that were in sound financial shape before the pandemic.

When the initial terms of the Main Street program were announced last month, the central bank said because the financial needs of businesses vary widely, it was seeking feedback from the public on potential refinements. 

Since then, the Fed Board said, it has received more than 2,200 letters from businesses and nonprofits. 

In response to the public input, the Board decided to expand the loan options available to businesses, and increase the maximum size of businesses eligible for support under the program. 

The changes include:

  • Creating a third loan option, with increased risk sharing by lenders for borrowers with greater leverage;
  • Lowering the minimum loan size for certain loans to $500,000; and
  • Expanding the pool of businesses eligible to borrow.

Under the new loan option, lenders would retain a 15% share on loans that when added to existing debt do not exceed six times a borrower’s income, adjusted for interest payments, taxes, and depreciation and other appropriate adjustments. 

This compares to the existing loan options where lenders retain a 5% share on loans, but have different features. Under all of the loan options, lenders will be able to apply their industry-specific expertise and underwriting standards to best measure a borrower’s income. 

In total, three loan options — termed new, priority, and expanded — will be available for businesses.

Additionally, businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible, compared to the initial program terms, which were for companies with up to 10,000 employees and $2.5 billion in revenue. 

The minimum loan size for two of the options was also lowered to $500,000 from $1 million. With these changes, the program will now offer more options to a wider set of eligible small and medium-size businesses.

The bank added that it was evaluating “a separate approach” to meet the “unique needs” of non-profit groups.

Economy

From Big Cities to Backyards, July 4 Not Usual Blowout Bash
In The News
From Big Cities to Backyards, July 4 Not Usual Blowout Bash

NEW YORK (AP) — The idea sounds almost un-American. The Fourth of July was always a time for communities to come together, daylong celebrations with patriotic parades in the morning and fireworks finales to cap it off. This year, people are being urged to stay home.... Read More

House Clears Bill Extending Loan Program for Small Businesses to Aug. 8
Economy
House Clears Bill Extending Loan Program for Small Businesses to Aug. 8

WASHINGTON — A day after the Senate passed a last-minute extension of the Paycheck Protection Program loan application deadline, the House did the same Wednesday, clearing the bill for the president.  Somewhat unexpectedly, the Senate by unanimous consent passed a bill on Tuesday from Sen. Benjamin... Read More

Treasury Secretary, Fed Chairman Split on Urgency of Congressional Relief Action
Economy
Treasury Secretary, Fed Chairman Split on Urgency of Congressional Relief Action

WASHINGTON — Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell have worked hand in hand to soften the economic devastation wrought by COVID-19, but they don’t appear to see eye to eye on the potential for a quick recovery and how soon additional support... Read More

‘Sin Taxes’ Could Help States in Pandemic Budget Slump — At Least a Little Bit
Economy
‘Sin Taxes’ Could Help States in Pandemic Budget Slump — At Least a Little Bit

WASHINGTON — Gas tax revenue plummeted this spring, income taxes won’t rebound anytime soon and some states are offering a property tax holiday because people can’t pay during the pandemic. But so-called sin taxes are rolling in as liquor stores boom, marijuana sales continue, vapers vape... Read More

New Coronavirus Spike Alarms Republicans, But Not Trump
Health
New Coronavirus Spike Alarms Republicans, But Not Trump

WASHINGTON — The final Thursday in June saw jobless claims top 1 million for a 14th straight week and a frightening spike in coronavirus infections across the Sun Belt, compelling a growing number of Republican governors and members of Congress to issue urgent public health warnings.... Read More

GAO: Virus Relief Program Has Inadequate Safeguards; $1.4B in Relief Payments Sent to Dead People
In The News
GAO: Virus Relief Program Has Inadequate Safeguards; $1.4B in Relief Payments Sent to Dead People
June 26, 2020
by Dan McCue

WASHINGTON - Confronted with an extraordinary public health crisis, the federal government moved with uncommon agility to bolster the economy and quickly establish services for those infected with the virus, the nonpartisan Government Accountability Office said Thursday. But in doing so it also sowed confusion, failed... Read More

News From The Well
scroll top