The Federal Reserve has opened its Main Street Lending Programme for small and mid-size businesses, encouraging lenders to start making loans in the much-anticipated programme immediately.
Lenders are now able to register through the Boston Fed, which will administer it. The Fed will begin purchasing 95 per cent of loans made through the programme’s three facilities “soon,” the Boston Fed said on its website Monday.
“Lenders can find the necessary registration documents on the programme site and are encouraged to begin making Main Street programme loans immediately,” said the Boston Fed.
The programme will lend up to $600 billion (Dh2.2 trillion) through the three facilities, each of which will make slightly different loans to businesses with up to 15,000 employees or $5bn in revenue last year. Loans will range in size from $250,000 to $300 million for an expansion of existing debt.
The Main Street facilities were first announced at the end of March as part of the Fed’s emergency response to the coronavirus pandemic. The programme has been expanded twice since, in attempts to make sure it would be utilised by a broad swathe of American companies after facing criticism from lawmakers and business groups that said it wouldn’t have wide enough reach.
The facilities mark the first time the Fed will directly support America’s so-called Main Street firms. The loans are meant to reach those that may not be able to easily access capital markets for borrowing or to raise equity, but are too large to tap the Small Business Administration’s Paycheck Protection Programme loans, which are meant for businesses with fewer than 500 employees.
The programme has taken time to set up and presents new challenges to the Fed, such as how to lend to companies that don’t have official designations from ratings companies. Fed Chair Jerome Powell said in May that the Main Street facilities were the most challenging to set up.
It’s backed by a $75bn investment from the Treasury Department that’s part of the $454bn allocated by Congress in the CARES Act for the Fed’s emergency-lending programmes. The central bank has said it will disclose lender, borrower and loan details of the CARES Act programmes on a monthly basis.
