Key Highlights
- Program available to small- and medium-sized businesses that were established before March 13, 2020
- To be eligible, businesses must have 15,000 employees or less and have had annual revenue in 2019 of less than $5B
Announced in March as part of the federal government’s pandemic relief response, the Main Street Lending Program is now open for business and ready to make loans.
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Though administered by the Federal Reserve Bank of Boston, lenders (banks) are now able to register through the Boston Fed to make Main Street Lending Program loans to small and mid-size businesses. The Fed will begin purchasing 95% of the loans made through the program in order to take the risk off banks’ balance sheets and to allow banks to make more loans. The Boston Fed said, “Lenders can find the necessary registration documents on the program site and are encouraged to begin making Main Street program loans immediately.”
To be eligible for Main Street Lending Program loans, businesses must have 15,000 employees or less and must have had annual revenue of less than $5B in 2019. In other words, these businesses had to have been in “sound financial condition” prior to the COVID outbreak. (What exactly that means, the Fed doesn’t say except that the businesses had to have had annual revenue of less than $5B in 2019.) Also, eligible businesses must have been established before March 13, 2020.
The Main Street Lending Program will lend up to $600B via three facilities, each facility making slightly different loans. Loan sizes will range from $250,000 to $300M for an expansion of existing debt. Loans will be structured as 5-year loans with floating rates. Payments will be deferred in the beginning of the cycle with no principal due for two years and no interest for one year.
These loans are designed to reach businesses that may not be able to easily access capital markets for borrowing or to raise equity but are too large to tap the SBA’s Paycheck Protection Program loans directed to businesses with less than 500 employees. The Main Street Lending Program is backed by a $75B investment from the US Treasury Department as a component of the CARES Act.
Unlike the Payroll Protection Program, loans through the Main Street Lending Program are NOT FORGIVABLE and business ARE NOT REQUIRED TO REHIRE THEIR EMPLOYEES. Businesses that had already laid off workers WILL BE ABLE TO APPLY FOR MAIN STREET LENDING PROGRAM LOANS.
Thanks to CNN Business, Investopedia, The Business Journals and BloombergNews and Business Insider.
Also read: Podcast: Breaking News, SBA PPP Program | 12 Mortgage Forbearance, 1 in 10 Borrowers in Forbearance is Equity Poor, Berkshire Hathaway Chief Points to Low Inventory & Buying Sight-Unseen
