A New Opportunity for Small to Mid-Size Businesses
On April 8, 2020, the Federal Reserve took additional steps to help stabilize the economy and provide economic relief to businesses across the country. The role of the Federal Reserve can be explained by its mandate from Congress: “to promote maximum employment and stable prices, along with its responsibilities to promote the stability of the financial system.” In response to this mandate, the Federal Reserve—in addition to the many steps it has already taken—has announced its new $600 billion Main Street Lending Program.
The Main Street Lending Program is aimed at helping small to mid-size businesses that were in good financial standing before the COVID-19 crisis. As part of the program, the Federal Reserve will offer 4-year loans to companies that employ up to 10,000 workers or with revenues of less than 2.5 billion.
In its press release, the Federal Reserve has articulated the following additional details about the Main Street Lending Program:
• Principal and interest payments will be deferred for one year.
• Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses.
• Banks will retain a five (5) percent share and sell the remainder to the Federal Reserve which will purchase up to $600 billion of loans.
• Companies that seek to take advantage of the Main Street loans must commit to make reasonable efforts to maintain payroll and retain workers.
• Borrowers must follow compensation, stock repurchase, and dividend restrictions that are set forth under the CARES Act.
• Companies that have taken advantage of the Paycheck Protection Program may also take out Main Street loans.
The Main Street Lending Program offers small to mid-size businesses another opportunity to take advantage of an economic relief package that the Federal Government has created during these unprecedented times. Understanding how to take advantage of these different lending opportunities is important for both the short-term and long-term success of your business.
If you want to read the entire press release issued by the Federal Reserve, it can be found here: https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm