Even when applicants are eligible for the Federal Reserve’s Main Street Lending Program, participating banks made just a tiny fraction of loans through the program, according to Fed survey research released today. Nearly three-quarters of MSLP lending banks said that Main Street loans accounted for less than 2.5% of the commercial and industrial loans made to MSLP-eligible businesses since mid-June. Just 13% said that MSLP loans accounted for more than 10% of their C&I loans to eligible borrowers.
More broadly, 79% of banks surveyed were registered lenders. A little over a quarter were active MSLP lenders, and another quarter expected to start making loans in the coming weeks. About 8% said they were registered but would only make MSLP loans if conditions deteriorated, and about 15% said they did not intend to register for the MSLP at all.
When asked why they had not registered to lend, almost all non-participating banks cited their ability to meet eligible borrowers’ credit needs without MSLP participation. Banks that turned down MSLP applications most commonly cited excessive applicant EBITDA levels and covenants and certifications that are too restrictive for borrowers. The survey comes as the MSLP has attracted less borrower interest than originally expected, with just $1.9 billion lent through Sept. 20 out of a total capacity of $600 billion, according to Fed reports.