The day after record third-quarter real gross domestic product (GDP) statistics were released showing 33.1% growth, the Federal Reserve Friday said it was lowering the minimum threshold for loans offered through its Main Street Lending Program (MSLP) in an effort to help small businesses struggling through the coronavirus crisis.
The Fed said it was taking the action to “better target support to smaller businesses that employ millions of workers and are facing continued revenue shortfalls due to the pandemic.”
The minimum loan size for three Main Street facilities available to for-profit and non-profit borrowers, the Fed said, has been reduced from $250,000 to $100,000. The Fed also said it has adjusted fees to encourage the provision of these smaller loans.
The central bank said loan documents reflecting the new terms are expected to be available to registered lenders within the next week.
Also Friday, the Fed said it and the Treasury Department have issued a new frequently asked questions (FAQ) document clarifying that Paycheck Protection Program (PPP) loans of up to $2 million may be excluded for purposes of determining the maximum loan size under the Main Street Lending Program, if certain requirements are met. The Fed said that action “should also help smaller businesses access Main Street loans.”
The MSLP offers several five-year loan options, with deferred principal and interest payments for qualified businesses and nonprofits. Loans are available to for-profit and non-profit borrowers that were in sound financial condition before the COVID-19 pandemic but lack access to credit on reasonable terms, the Fed reminded.
Since it became “fully operational” in July, the Fed said the MSLP has made almost 400 loans totaling $3.7 billion. It said the loans provide support to businesses from a wide range of industries.
Federal Reserve Board adjusts terms of Main Street Lending Program to better target support to smaller businesses that employ millions of workers and are facing continued revenue shortfalls due to the pandemic