The U.S. Federal Reserve and U.S. Department of Treasury revealed details Thursday of a $600 billion initiative to provide four-year loans to support small and mid-sized businesses.
Through the Main Street Lending program, businesses employing fewer than 10,000 employees, with revenues south of $2.5 billion, that were in good financial standing before the crisis, will be eligible to apply for four-year loans, with principal and interest payments deferred for one year.
The announcement came as part of a total $2.3 trillion plan to provide relief and in some cases more liquidity to small businesses, local governments and lending institutions participating in the Small Business Administration’s Paycheck Protection Program (PPP).
“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” Federal Reserve Board Chair Jerome Powell said in a statement. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”
Eligible banks can either originate loans using the program or increase the size of existing loans, but the bank only retains a 5 percent share with the remaining 95 percent belonging to the Main Street facility, which will purchase up to $600 billion in loans, providing that liquidity.
The businesses seeking the loans must commit to making reasonable efforts to maintain workers and payroll, while following compensation, stock repurchase and dividend restrictions created under the CARES Act.
“The Main Street Business Lending Program will make a significant difference for the 40,000 medium-sized businesses that employ 35 million Americans,” Treasury Secretary Steve Mnuchin said in a statement. “This important Main Street initiative complements the robust relief efforts already underway such as the Paycheck Protection Program, Employee Retention Credits, and Economic Impact Payments, while protecting taxpayer funds.”
Businesses that have participated in the PPP can also apply for the Main Street Lending program.