Small and Medium-Sized Businesses Gain More Access to Loans

The Main Street Lending Program, a federal initiative to provide loans to small and medium-sized businesses, is expanding access and easing conditions on loans in the United States’ effort to boost the economy.

As the COVID-19 pandemic continues to take its toll on the global economy, the reopening of businesses large and small is crucial to getting markets back to a state of normalcy. On 8 June, the Federal Reserve Board announced the expansion of its Main Street Lending Program. The program provides qualifying small and medium-sized businesses more leverage to reopen and rehire workers through expanded access to loans and a more flexible repayment schedule.

Under the CARES Act, funding was allocated by the Treasury Department to be used toward the Main Street Lending program, which is run through the Federal Reserve Bank of Boston.

Under this week’s changes to the program, the minimum size for certain loans was cut in half from $500,000 to $250,000, while the maximum loan size was increased. The terms of each loan option were increased from 4 to 5 years, while the repayment period for loans was extended by delaying principal payments for two years as opposed to one.

The Reserve Bank will purchase 95% of each eligible loan. If a loan originated under the previous terms and conditions of the Main Street Lending Program and was funded before 10 June 2020, that loan will be accepted under the new conditions. According to Fed Chairman Jerome Powell, the program is just days away from its first loan, expressing confidence in the ability of the new provisions of the program to support employment during these difficult financial times.