Federal Reserve Announces Main Street Lending Program
Last week, the Federal Reserve took additional actions to provide up to $2.3 trillion in loans to support the economy during the COVID-19 health crisis.
Critically, the Fed will purchase of up to $600 billion in loans through the Main Street Lending Program, authorized under the CARES Act, to ensure credit flows to mid-sized businesses with more than 500 employees. The Department of the Treasury will provide $75 billion in equity to the facility, and while ABC awaits additional guidance on this program, the CARES Act does not require neutrality from borrowers in union elections as a condition of participating in the Main Street Lending Program:
- The Main Street Lending Program will offer four-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion.
- Principal and interest payments will be deferred for one year.
- Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses.
- Banks will retain a 5% share, selling the remaining 95% to the Main Street facility, which will purchase up to $600 billion of the loans.
- Firms seeking Main Street loans must commit to make reasonable efforts to maintain payroll and retain workers.
- Borrowers must also follow compensation, stock repurchase and dividend restrictions that apply to direct loan programs under the CARES Act.
- Firms that have taken advantage of the PPP may also take out Main Street loans.
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