The Federal Reserve today announced several adjustments to the Main Street Lending Program intended to facilitate participation by more small and midsize businesses. Responding to calls by the American Bankers Association and others to increase small business access to the program, the Fed is lowering the minimum loan size for certain loans from $500,000 to $250,000. The Fed is also increasing the maximum loan size for each loan option under the MSLP, increasing the term for each loan option from four years to five years and extending the repayment period for all loans by delaying principal payments for two years instead of one.
“We appreciate the Federal Reserve’s willingness to make additional changes to the Main Street Lending Program,” said ABA President and CEO Rob Nichols. “By adjusting the loan terms, including lowering the minimum loan size, more creditworthy small and mid-sized businesses should be able to access this program and hopefully weather the economic challenges caused by COVID-19. We encourage the Fed to remain flexible as the needs of borrowers and lenders evolve.”
Once the program is open for lender registration—which the Fed said it expects to happen “soon”—lenders may begin making loans immediately after they successfully register. The Fed will purchase 95% of each eligible loan submitted to the MSLP, provided that those transactions are consistent with the facility’s requirements. It will also continue to accept loans that were originated under the previously announced terms if those loans were funded prior to June 10, 2020.
Finally, the Fed said it is working separately to establish a program to provide support to nonprofit organizations that may be facing financial challenges due to the pandemic.