Federal Reserve Prepares Main Street Lending Program


The Federal Reserve System prepares the Main Street Lending Program to enhance support for small and mid-sized businesses.

The Main Street Lending Program is a new offering created by the Federal Reserve to help businesses during the ongoing COVID-19 crisis and accompanying economic downturn. It is an alternative to the Paycheck Protection Program (PPP), the Economic Injury Disaster Loan (EIDL) program and the Express Bridge Loan program, all of which are running low on funds.

The Main Street Lending Program is designed to enhance support for small and mid-sized businesses that were in good financial standing before the crisis.

  • Offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion.
  • Loans must be repaid.
  • Principal and interest payments will be deferred for one year.
  • 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 taken advantage of the Payroll Protection Program may also take out Main Street loans.
  • Businesses are specifically prohibited from using the loan proceeds to repay or refinance existing debt.
  • The Main Street loan must be paid before repaying other loan commitments that have an equal or lesser priority.

The program was unveiled on April 9 and is due to launch soon.

As part of that program, banks will make loans to eligible small and medium-sized businesses and the Fed will then purchase 95% of the loan via a special-purpose vehicle. The Fed asked for public input and has said it may change the terms if necessary.

Making the program workable for lenders is critical to getting federal funds into the real economy quickly, but the terms of that and other assistance schemes are under growing scrutiny amid worries insufficient conditions are being placed on borrowers and that banks may dish out the funds unevenly.

The program's proposed $1 million minimum loan size seems too large and will exclude many small businesses that need to borrow a smaller amount. Minority business enterprises specifically could use smaller loans as they may already have other loans in place or simply may not qualify for such a large amount which eliminates any potential benefits the minority communities they employ.

Final decisions and details about The Main Street Lending Program are forthcoming from the Federal Reserve.