WASHINGTON, D.C. — The Federal Reserve Board on Monday expanded its Main Street Lending Program to allow more small- and medium-sized businesses to receive support.
To give borrowers more flexibility in repaying the loans, the Federal Reserve Board lowered the minimum loan amount, raised the maximum loan limit, adjusted the principal repayment schedule to begin after two years, and extended the term to five years, according to a news release from the federal agency.
The board expects the program to be open for lender registration soon and to be actively buying loans shortly afterward.
"Supporting small and mid-sized businesses so they are ready to reopen and rehire workers will help foster a broad-based economic recovery," said Federal Reserve Chair Jerome H. Powell. "I am confident the changes we are making will improve the ability of the Main Street Lending Program to support employment during this difficult period."
Small- and medium-sized businesses are a vital part of the economy and employ tens of millions of people, according to the board, and, because their needs vary widely, the board has extensively sought feedback and revised the Main Street program accordingly.
The changes include:
• Lowering the minimum loan size for certain loans to $250,000 from $500,000.
• Increasing the maximum loan size for all facilities.
• Increasing the term of each loan option from four years to five years.
• Extending the repayment period for all loans by delaying principal payments for two years, rather than one.
• Raising the Reserve Bank's participation to 95% for all loans.
Once they have successfully registered for the program, lenders are encouraged to begin making Main Street Lending Program loans immediately. The program intends to purchase 95% of each eligible loan that is submitted to the program, provided that the required documentation is complete and the transactions are consistent with the relevant Main Street facility's requirements.
The Main Street Lending Program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020.
The Main Street Lending Program was established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the CARES Act.