The facility aimed at supporting the paycheck protection program (PPP) loan program by extending credit to financial institutions that make PPP loans – using the loans as collateral – is now “fully operational” and available to provide liquidity to eligible financial institutions in order to help small businesses, the Federal Reserve said Thursday.
The establishment of the Fed’s Paycheck Protection Program Liquidity Facility (PPPLF) was announced April 6. The facility allows Federal Reserve Banks to extend non-recourse loans to institutions eligible to make the PPP loan program. (The loan program was created under the Coronavirus Aid, Relief and Economic Security Act [CARES Act], enacted into law March 27.) PPP loans guaranteed by the SBA that are originated by eligible financial institutions may be pledged as collateral to the Federal Reserve Banks.
The Fed has said that the intent of the facility is to extend credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value. “Supplying financial institutions with additional liquidity will help increase their capacity to make PPP loans,” the Fed said Thursday.
The facility is managed by the Federal Reserve Bank of Minneapolis on behalf of the entire Federal Reserve system.