The Federal Reserve Board announced on Thursday, April 30 that the scope and eligibility for the Main Street Lending Program will be expanded after 2,200 letters of feedback were received from the public. The Main Street Lending Program was developed to help credit flow to small and medium-sized businesses that were in good financial standing prior to the pandemic.Â
Based on the input from individuals, businesses and nonprofits, the Federal Reserve Board has made the following changes:
- Creating a third loan option, with increased risk sharing by lenders for borrowers with greater leverage;
- Lowering the minimum loan size for certain loans to $500,000; and
- Expanding the pool of businesses eligible to borrow.
The three loan options available for businesses include: new, priority and expanded. Under the new loan option, priority loans, lenders will retain a 15 percent share. However, it should not exceed six times the borrower’s income when added to existing debt and appropriate adjustments such as interest payments, taxes and depreciation will be made. On the new and expanded loans, lenders will retain a 5 percent share but have different features in terms of loan size and payment.Â
Businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible to apply, whereas previously only companies with up to 10,000 employees and $2.5 billion in revenue were eligible. The minimum loan size for two of the options was also lowered to $500,000 from $1 million.Â
With these changes to the Main Street Lending Program, more small and medium-sized businesses are able to apply. The Department of the Treasury will provide $75 billion for the program using funds from the CARES Act.Â
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