Main Street Lending Program Updates

June 9, 2020 | Stuart McCallum

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By Stuart McCallum, ASA

On Monday, June 8, the Federal Reserve updated the terms of the Main Street Lending Program. The Main Street Lending Program was originally established in March to support lending to small- and medium-sized businesses that were in sound financial condition prior to COVID-19 but were negatively impacted by the pandemic. Here’s what you need to know about the Main Street Lending Program :

  1. The minimum loan size was lowered from $500,000 to $250,000 and the maximum was raised from $200 million to $300 million (the maximum will vary by bank).
  2. The loan terms are expanded from four years to five years.
  3. The Federal Reserve will take on 95% of all the loan risk. This is said to incentivize lenders to offer credit. Lenders take on only 5% of the loan.
  4. There will be no principal repayment for up to two years. 
  5. Interest is delayed for one year and will be LIBOR plus 3%.
  6. The program will offer three different types of loans: new, priority, and expanded.
  7. The Federal Reserve has said that a borrower participating in the PPP (Paycheck Protection Program) can apply for the Main Street Lending Program as well.
  8. Main Street loans are to be used for payroll or other payments that cannot be met due to COVID-19.

These updates make the program more favorable to small and mid-size businesses. Lenders have been encouraged by the Federal Reserve to begin making Main Street loans immediately once they are registered with the Federal Reserve to participate in the program.