Main Street Lending Program: Everything You Need to Know
The Main Street Lending Program: What is it?
The coronavirus pandemic has effectively changed the way the world does business, and while some industries are doing relatively well despite stay at home orders and mandatory business closures, there are a lot of local businesses out there that have suffered a big hit to their cash flow. Even with federal restrictions being lifted paired with government relief programs like the Paycheck Protection Program (PPP), individual state mandates and requirements have made it difficult for smaller operations to conduct business as usual, and thus difficult to meet business expenses as usual.
Thankfully, another program called the Main Street Lending Program has been recently put into place by the Federal Reserve Bank of Boston in order to provide further aid to small and medium sized businesses that were doing well before the pandemic. Please note that unlike some of the other federally-funded financial aid that has been provided, the Main Street Lending Program Loans are not grants and cannot be forgiven. The gist of the program is that the Federal Reserve has committed to actually purchasing a portion of the loans given by banks, ranging anywhere from 85% to 95% of the loan, depending on the loan option. This incentivizes banks to be more lenient with their lending requirements while also still urging responsible lending decisions since there is still a portion of the loan retained by the lender, providing loans ranging from $500,000 through $200,000,000.
Eligibility is relatively cut-and-dry, and will be outlined in just a bit in this article, with the most difficult requirements being that the business needed to have been in good financial standing before the pandemic, that the business needs to be small to medium sized (no more than 15,000 employees or no more than a 2019 annual revenue of $5 billion USD), and that it cannot be on the list of businesses that are ineligible for SBA loans anyway, which you can check out here.
To sweeten the deal, the Main Street Lending Program has also expanded and revised the types of loans available, now including Main Street New Loans, Main Street Priority Loans, and Main Street Expanded loans, all 4-year terms with a few differences in the details such as borrower origination fees and repayment structure, which will also be explained in just a bit!
Let’s jump into what everyone needs to know first: are you eligible? As mentioned earlier, eligibility is relatively lenient, and has been structured this way in order to make sure that the businesses taking advantage of the Main Street Lending Program are the businesses that actually need it.