Federal Reserve Aims To Entice More Businesses To Use COVID Loan Program
On October 30, the Federal Reserve announced that it had reduced the minimum loan amount for its Main Street Lending Program (MSLP) to $100,000 from $250,000 in an effort to entice more U.S. companies to take advantage of its little-used emergency lending facilities.
As a reminder, the MSLP supports lending to small and medium-sized for-profit businesses and nonprofit organizations that were in sound financial condition before the COVID-19 pandemic, but now lack access to credit on reasonable terms. The program offers several five-year loan options, with deferred principal and interest payments for qualified businesses and nonprofits.
The Fed also adjusted fees for the loans and also now will allow borrowers that have taken out as much as $2 million in U.S. Small Business Administration (SBA) Paycheck Protection Program loans to exclude that debt from calculations of their eligibility to apply for MSLP loan.
Business groups have been pleading with the Fed for months to make these changes. In its announcement, the Fed said its changes will “better target support to smaller businesses that employ millions of workers and are facing continued revenue shortfalls due to the pandemic.” So far, the Fed has purchased only 400 MSLP loans, or $3.7 billion, which represents just 0.6 percent of the potential $600 billion it could lend under the program.
The Fed changed the For-Profit Business Frequently Asked Questions (FAQs) governing the program as well. Click the link to download the new version in Word format.