On April 9, 2020 the Federal Reserve took additional actions to provide up to $2.3 trillion in loans to support the economy during the COVID-19 health crisis.
Per an issued press release, the Federal Reserve will purchase of up to $600 billion in loans through the Main Street Lending Program to ensure credit flows to small and mid-sized businesses. The Department of the Treasury will provide $75 billion in equity to the facility. There have been rumors suggesting this program requires neutrality from borrowers in union elections as a condition of the loan; this is not the case.
Some program highlights include:
- The Main Street Lending Program will offer 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion.
- 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 5 percent share, selling the remaining 95 percent to the Main Street facility, which will purchase up to $600 billion of loans.
- 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 PPP may also take out Main Street loans.
We will continue to provide updates and information about the Main Street Lending Program as the become available. In the meantime, if you have comments, questions, or concerns, please contact Barton Hacker at bhacker@centralohioabc.org.
