Main Street Lending Program

Main Street Lending Program

“The Main Street Lending Program is a program announced on April 9, 2020, in which the Federal Reserve will purchase loans that banks give to small and mid-sized businesses. The Fed will purchase 95% of each loan. This means that the bank must keep 5% of the loan on its books to discourage irresponsible lending by banks.

The program is designed to keep credit flowing to small and mid-sized businesses that were in “good financial standing” before the onset of the COVID-19 crisis, but which are now under extreme stress due to stay-at-home and business closure orders from state and local governments,” states Mark Kolakowski, contributor for Investopedia.

How programs provided direct relief to small businesses

With PPP, EIDL and the Main Street Lending Program small businesses should have the funding they need to fight past this global pandemic. Kolakowski also said “The Main Street Lending Program will offer 5-year loans to eligible businesses. Under the program, eligible banks may extend new loans, or increase the size of existing loans. The Fed will purchase 95% of a given loan’s value. Total purchases by the Fed are capped at $600 billion. Under the CARES Act, the U.S. Treasury made an initial equity investment of $75 billion from its Exchange Stabilization Fund (ESF) in the Main Street Lending Program.”

Businesses who participated in the PPP and EIDL programs could also be eligible for the main street lending programs, businesses that are not eligible for the PPP, unless based on the number of employees who are not eligible for the program.

To be eligible, a business must:

  1. Have been established before March 13, 2020.
  2. Must have 15,000 employees or fewer or have had annual revenue in 2019 of less than $5 billion.
  3. Must not be a type of business ineligible to receive the Paycheck Protection Plan (PPP) funds, except with regards to the number of employees.
  4. Be “created or organized in the United States or under the laws of the United States with significant operations in and a majority of its employees based in the United States.”
  5. Must not have participated in the Primary Market Corporate Credit Facility (PMCCF).
  6. Must not have received “support pursuant to the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act).” That is the section that provides $500 billion of loans to large businesses.

Businesses that receive loans under the Paycheck Protection Plan (PPP) may also be eligible for the Main Street Lending Program. However, a key proviso is: “Firms seeking Main Street loans must commit to making 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.”

You can find more information about the Main Street Lending Program here.

You can also find more information about the PPP, or EIDL here.

If you have questions about COVID-19 or synonyms of COVID-19 visit the CDC’s website for more information on how to protect yourself or how and where to get tested. If you are experiencing symptoms be sure to follow the CDC Guidelines and self-isolate.

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