The Federal Reserve has expanded the terms of its Main Street Lending Program in ways that should allow more small and medium-sized businesses to receive loans. The program is designed to help credit flow to businesses that were in sound financial condition before the onset of the COVID-19 pandemic, but now need loans to help maintain their operations until they have recovered from, or adapted to, the impacts of the pandemic.
Changes to program terms announced on June 8 (Off-site) should help lenders support a wider variety of small and medium-sized businesses facing challenges, by:
- Lowering the minimum loan size in the program to $250,000 (from $500,000)
- Increasing the maximum loan size for all facilities
- Increasing the term of each loan option to five years, from four
- Extending the repayment period for all loans by delaying principal payments for two years, rather than one
- Raising the Reserve Bank’s participation to 95% for all loans
Lenders are eligible to receive an origination fee from the borrower, as well as servicing and other fees.
The next step in the program will be the opening of the lender registration portal, expected soon. Then lenders will be able to initiate the registration and verification process.
Once registration is open and lenders have successfully registered, they can begin making Main Street loans immediately – given the program’s intent to purchase 95% of each eligible loan submitted, as long as documentation is complete and the transactions are consistent with program requirements. (The program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020.)
New terms sheets (Off-site) are available, reflecting the June 8 changes. Forms and agreements (Off-site) have been updated to align with the changes.
Lenders can refer business customers inquiring about the program to a concise overview (Off-site).
Further, the program’s website (Off-site) contains program information for lenders, including updated Frequently Asked Questions (FAQs) (Off-site, PDF). Lenders and other interested parties are encouraged to sign up for program updates (Off-site) by email, on the website. And any inquiries can be sent to MSLP@bos.frb.org.
