While the federal government’s response to aid businesses affected by the coronavirus has mostly attracted attention to the Paycheck Protection Program (PPP), another massive initiative to provide capital to smaller companies was recently created: the Main Street Lending Program. This program, managed by the Federal Reserve, will provide up to $600 billion in loans to small- and medium-sized businesses and will launch in the near future.
The Main Street Lending Program has been designed to grant businesses in “sound financial condition” access to substantial credit during this uncertain period. Loans will be made by private financial institutions and backed by the Federal Reserve.
The U.S. Chamber of Commerce recently created a guide to help businesses understand the scope of the Main Street Lending Program. Here are a few important things from the guide that businesses need to know.
Is my company eligible?
The Main Street Lending Program has strict criteria for which small- and medium-sized businesses can take loans. These eligibility rules include that businesses must:
- Have been established before March 13, 2020.
- Have either less than 15,000 employees or 2019 annual revenues of no more than $5 billion.
- Have been created or organized in the United States with significant operations in and a majority of its employees based in the United States.
- Not also participate in one of the other Main Street loan facilities or the Primary Market Corporate Credit Facility.
It’s also important to note that businesses that received PPP loans are still eligible to receive a Main Street Lending loan.
Unlike the loans offered through the PPP, Main Street Lending loans are not forgivable and all loans must allow businesses to prepay without any penalty.
How much can my company borrow?
The Main Street Lending Program offers three different types of secured or unsecured four-year loans, with loan sizes ranging widely between $500,000 and $200 million. Loan terms are set at an adjustable rate that is tied to the London Inter-bank Offered Rate (LIBOR) plus 300 basis points. Notably, principal and interest payments will be deferred for one year, in order to help businesses use that time to recover from COVID-19.
Unlike the loans offered through the PPP, Main Street Lending loans are not forgivable and all loans must allow businesses to prepay without any penalty.
What other conditions do the loans have?
The Main Street Lending loans have some additional conditions attached. Borrowers must make “commercially reasonable efforts” to maintain payroll and retain employees. However, businesses that already laid off or furloughed workers during COVID-19 are still eligible for Main Street loans.
How do I apply?
As soon as the program officially launches, interested businesses that meet all eligibility requirements can submit an application and documentation to approved private lenders. Federally insured institutions, including banks, savings associations and credit unions, as well as any U.S. branch of a foreign bank, are eligible to participate in the program. Borrowers would be smart to first contact the lender they currently work with to see if they are participating in the program.
More information about the application process and participating lenders for the Main Street Lending Program will be released shortly by the Federal Reserve.
Read more in this guide
The U.S. Chamber has released a detailed guide to the Main Street Lending Program, which outlines even more details, including further eligibility requirements, three loan option breakdowns and more.
CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.
