Fed Expands Main Street Lending Program Scope To Include Large Corporations
The Federal Reserve said Thursday it was expanding its Main Street loan program, opening it up to larger businesses and expanding the types of loans that will be available.
Billed as one of the Fed’s foundational initiatives to provide cash to businesses and households in need, the Main Street program will now allow businesses with up to 15,000 employees and $ 5 billion in revenue to apply. a funding.
This represents an increase from the previous limit of 10,000 workers and $ 2.5 billion in revenue for a program aimed at midsize businesses whose operations have been hampered by social distancing efforts put in place to limit the spread of the coronavirus.
The Fed also offers another set of loans. The changes divide loans into three categories: new, priority and expanded. New and priority loans have a minimum size of $ 500,000, but expanded loans are $ 10 million and above.
The maximum loan size varies: for new loans, the limit is either $ 25 million or four times 2019 adjusted earnings before taxes, interest, depreciation, and amortization, whichever is less, while loans Priorities have a maximum of $ 25 million or six times EBITDA. Extended loans are limited to $ 200 million or 35% of unused or outstanding debt, or six times EBITDA.
Loan terms are two to four years at the LIBOR rate, the benchmark for overnight borrowing for banks, plus 3%.
The new loan option will now require banks to take on 15% of the loan, with the Fed taking over the rest. The existing loans imply a 5% participation for the banks.
A Fed announcement said the change was made after solicit feedback on initial program details. Some 2,200 individuals, businesses and nonprofits sent in responses, prompting the Fed to expand the program’s offerings as well as the size of entities that would be eligible.