To ensure credit flows to small and mid-sized businesses during the COVID-19 crisis, the Federal Reserve announced new actions that include the purchase of up to $600 billion in loans through the Main Street Lending Program. The Department of the Treasury, using funding from the Coronavirus Aid, Relief, and Economic Security Act will provide $75 billion in equity to the facility.
The Main Street Lending Program will enhance support by offering four-year loans for small and mid-sized businesses employing up to 10,000 employees or with revenues up to $2.5 billion annually that were in good financial standing before the crisis. Principal and interest payments will be deferred for one year. Eligible banks may originate new Main Street loans to increase the size of existing loans to businesses.
Firms seeking Main Street loans must commit to making reasonable efforts to maintain payroll and retain workers. Borrowers also must follow compensation, stock repurchase and dividend restrictions that apply to direct loan programs under the CARES Act. Firms that have taken advantage of the Paycheck Protection Program established under the CARES Act also may take out loans under the new program.
