Credit unions are being urged by their federal regulator to participate in the Federal Reserve’s “Main Street Lending Program” (MSLP) as a way of easing the flow of credit to small- and medium-sized businesses.
In a message to credit unions Wednesday, the National Credit Union Administration (NCUA) urged credit unions to participate in the program, set up by the Fed to help increase the flow of credit in the face of the financial impact of the coronavirus crisis.
NCUA, in its message, said that credit unions would be able to “assist their members during this difficult period with minimal risk exposure.” The agency said loans made through the MSLP will be offered as a participation; the Fed will provide 95% of the loan and the credit union will provide 5%. The credit union will service the loan, NCUA said.
“The NCUA encourages credit unions to participate in this program, if appropriate,” it said.
Loans issued under the program have a five-year maturity, deferral of principal payments for two years, and deferral of interest payments for one year. NCUA said that loans range in size from $250,000 to $300 million.
Lenders must register to participate in the program. That registration program opened this week. Once they have registered, lenders become “eligible” to provide funding through the program. Eligible borrowers apply for loans by contacting an eligible lender. U.S. businesses may be eligible for loans if they have 15,000 employees or fewer; or the business had 2019 revenues of $5 billion or less.