The Federal Reserve Board is tweaking its $600 billion Main Street Lending program to provide access to larger businesses and offer smaller loan amounts.
With the changes, businesses with up to 15,000 employees or $5 billion in annual revenue will be eligible to participate. When the program was announced in April, it was for companies with up to 10,000 employees or a maximum of $2.5 billion in annual revenue.
Also, the Fed is lowering the minimum loan amount per company from $1 million to $500,000.
Further, the Fed is creating a third loan option for borrowers, called a Priority Loan, which is designed to increase risk-sharing by lenders for borrowers with greater leverage. With the Priority loans, lenders would retain a 15% share on loans that, when added to existing debt, don't exceed six times the borrower's income. With the two original options, called New and Expanded loans, lenders retain a 5% share on loans, but have different features. All three loan options have four-year maturities. Unlike the disbursements made through the Paycheck Protection Program, these loans have to be repaid, but payment can be deferred for one year.
The changes were made as a result of feedback from more than 2,200 individuals, businesses, and nonprofits who sent letters to the Fed.
The Main Street Lending Program was developed to help "credit flow to small and medium-sized businesses that were in sound financial condition before the pandemic," stated the Federal Reserve Board. The Fed is considering a separate program for nonprofits.
The date upon which these program changes will take effect has not been announced, but will be soon, according to the Fed.