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The Fed reduces the minimum lending rate for its small business loan program



Marriner S. Eccles Federal Reserve Building in Washington, DC, USA, on Tuesday, August 18, 2020.

Erin Scott | Bloomberg via Getty Images

The Federal Reserve has lowered barriers to the lending program for smaller businesses as part of an effort to expand the attractiveness of the sparsely used facility.

In another pair of adjustments to the Main Street Loan Program, the Fed on Friday said it was reducing the minimum loan size from $ 250,000 to $ 1

00,000 and would ease restrictions on loans to for companies that have joined the Salary Protection Program.

With the aim of helping small and medium-sized companies overcome the Covid-19 pandemic, the program has so far granted nearly 400 loans with a total value of 3.7 billion USD. MSLP’s total capacity is $ 600 billion, thanks to $ 75 billion in collateral from the Ministry of Finance that can be leveraged.

In a statement, the Fed said the changes are “two key ways to target better support for smaller businesses that employ millions of workers and are facing a continued revenue shortfall. due to the pandemic. “

The Main Street program is part of a series of facilities that the Fed launched shortly after the pandemic escalated in early March.

However, both the borrower and the lender complain that some of the terms of the loan are too strict and the fees are higher than they are willing to pay. In many cases, PPP loans can be tolerated in many cases, Loans on Main Street are not, further reducing their appeal.

The change is other than the minimum loan waiver requirement of up to $ 2 million for PPP loans when calculating the applicant’s debt load. The Fed also said it is adjusting fees “to encourage these smaller loans.”

The move comes amid heightened concern about an economic slowdown moving into winter, triggered by a rise in coronavirus cases and the continuing deadlock on Capitol Hill over financial bailout. more. Fed officials repeatedly called on Congress to stimulate more, but the White House and congressional Democrats were unable to reconcile their competitive proposals.

Main Street loans are aimed at companies with fewer than 15,000 employees or with 2019 revenue of $ 5 billion or less. In addition to this program, the Fed also bought corporate debt and issued loans and pumped liquidity in many markets.


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