Federal Reserve Announces Main Street Lending Program

April 10, 2020

The Federal Reserve announced on April 9, 2020, the establishment of the Main Street Lending Program. This $600 billion lending program is designed to provide relief to small and mid-size businesses. The program is offering four-year loans to businesses with up to 10,000 employees or up to $2.5 billion in annual revenues for 2019. Loans will defer principle and interest payments for 12-months.

To be eligible for these loans, businesses must:

• not be a debtor in a bankruptcy proceeding
• have incurred or will incur losses due to COVID-19
• be created or organized in the United States, or have a majority of employees based in the United States

Loan restrictions include:

• Loan recipient must not use loan proceeds to repay other loan balances.
• Loan recipient must not seek to cancel or reduce any outstanding line of credit with any other lenders.
• Loan proceeds must be used to maintain payroll and retain employees during the loan term.
• Loan recipient will not outsource jobs until two years after the loan is repaid.
• Loans must not be used to pay dividends or buy back any stocks during the course of the loan or for 12 months after the loan has been paid off.

It is unclear how this loan program will affect, if at all, other CARES Act small business programs like the Paycheck Protection Program or Economic Injury Disaster Loans through the Small Business Administration. These are merely some of the most pertinent details concerning the Main Street Lending Program. Additional guidance, as well as application procedures, are expected to be announced soon. If you’re potentially interested in this CARES Act initiative, please contact your Riney Hancock financial advisor.