The Federal Reserve Board’s Main Street Lending Program should be up and running by the end of May, Fed Chairman Jerome Powell told the Senate Banking Committee Tuesday.
The Main Street program is intended to provide support for small and mid-size businesses that were in good financial condition before the onset of the COVID-19 crisis. It will offer 4-year loans to companies employing up to 15,000 workers or with revenues up to $5 billion. Principal and interest payments will be deferred for one year.
The Main Street program is one of several loan initiatives introduced by the federal government in response to the dramatic slump in economic activity brought on by the pandemic.
Firms seeking Main Street loans must commit to make reasonable efforts to maintain payroll and retain workers. Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act. Firms that have applied for loans through the Small Business Administration’s Paycheck Protection Program may also take out Main Street loans.
Eligible banks may originate Main Street loans or use Main Street loans to increase the size of existing loans to businesses. Banks will retain a 5 percent to 15 percent share of the loans, selling the remainder to the Fed’s Main Street facility, which will purchase up to $600 billion of loans.
The minimum loan size to be offered through the program is $500,000. The maximum is $200 million. Those thresholds were adjusted in response to public input. Powell said further adjustments to the program may be made going forward.
RBT CPAs will provide updates regarding the Main Street program and other financial assistance programs as information becomes available. If you have any questions, please contact us.