The Federal Reserve on Thursday released long-awaited details regarding its Main Street business lending program and several other initiatives it is undertaking to backstop the reeling U.S. economy.
Under provisions outlined for the first time, the loans would be geared toward businesses with up to 10,000 employees and $2.5 billion in revenues for 2019.
The Fed said the programs would total up to $2.3 trillion and include the Payroll Protection Program and other measures aimed at getting money to small businesses and bolstering municipal finances.
“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” Fed Chair Jerome Powell said in a statement. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”
The Main Street loans would be a minimum of $1 million and a maximum of either $25 million or an amount that “when added to the Eligible Borrower’s existing outstanding and committed but undrawn debt, does not exceed four times the Eligible Borrower’s 2019 earnings before interest, taxes, depreciation, and amortization,” whatever is less, according to a Fed release.
The total dollar amount geared to the program is $600 billion.
Terms would see an interest rate equal to the Fed’s Secure Overnight Financing Rate, currently 0.01%, plus 250-400 basis points with a four-year maturity.
A special-purpose vehicle that Fed created jointly with the Treasury Department will purchase 95% of the loan while the financing institution would hold the other 5%.
In addition to the Main Street program aimed at mid-size companies, the Fed also announced a move to “bolster the effectiveness” of the PPP by getting more liquidity through credit extensions to institutions lending through the program.
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