The Federal Reserve Board has modified the terms of the Main Street Lending Program (MSLP) to make it more obtainable for smaller businesses, according to a Fed statement on Friday (Oct. 30).
Smaller businesses are financially struggling due to the pandemic and extended revenue shortfalls could affect the millions of workers they employ, the Fed said in announcing the new parameters.
The three Main Street facilities have been lowered to $100,000 from $250,000 and the fees adjusted accordingly.
The Fed and Department of the Treasury also reaffirmed that up to $2 million in Paycheck Protection Program loans can be excluded when calculating the maximum loan size under the Main Street Lending Program.
The Main Street program was launched to help businesses facing financial struggles due to the COVID-19 pandemic. The five-year loans were intended to be extended to companies that were on solid financial footing but lacked access to affordable credit.
The program was offered to small and medium-sized businesses (SMBs) with no more than $5 billion in revenue or 15,000 employees. Interest payments were waived for the first year and principal payments for the first two years.
Loan documents outlining the modified terms are anticipated to be available sometime next week.
The MSLP has so far extended close to 400 loans totaling $3.7 billion, the Fed said, noting the program was established with $75 billion in equity provided by the Treasury Department from the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The loan program was introduced in June after undergoing several revisions. Its purpose was to help the smallest of businesses stay afloat amid the worst pandemic the world has seen in over 100 years.
The program got a chilly reception and had more money to lend than it had customers. Not long after it was launched, economists started suggesting that easing the rules would attract and assist more SMBs.
The first modifications to the program came about in July to make it easier for schools, hospitals and social service organizations to access funds. The minimum employment requirement for nonprofits was lowered to 10 from 50, and limits were relaxed for funds coming from donations.
In September, there were still few takers for the MSLP despite additional modifications and the cash crunch SMBs were still facing.