Main Street Lending Program – Lee Chandler
​Back in April, the Fed announced that it would establish a $600 billion Main Street
Lending Program order to help small and mid-sized businesses during these difficult and
uncertain times. At last, on June 15, the Federal Reserve Bank of Boston, which is
administering the program, opened up registration. However, interest from banks and lenders
has been cool, with there being several issues with the program that lenders perceive to lower
demand for it. Firstly, many small businesses don’t even qualify for this loan due to how the
maximum amount that can be taken is determined by EBITDA of the business, but the minimum
to qualify for it is $250,000. Also, there is a relatively short time in which businesses must repay
the loan, and together with the interest that must be paid as well, the loan could be burdensome
for many businesses. This program is different from the Paycheck Protection Program(PPP),
which had overwhelming interest from borrowers, in several important ways. The PPP loan was
completely forgiven if businesses met the requirements and also had a minimum loan amount of
just $1,000, which is much more catered toward smaller businesses. While the PPP was
required to go to payroll costs, rent, and utilities, this Main Street lending program can go toward
anything. Lastly, the Main Street lending program has much more paperwork than PPP. While
the program has experienced a bumpy first few days, the Fed has stated that it would be open
to adjustments. Borrowers have advocated for the minimum loan amount to be lowered to
$100,000 and loosening restrictions. However, others say that this loan should be for larger
businesses and that the PPP would meet the needs of small businesses. It will be interesting to
see how this new loan program will develop and its impact on bolstering economic growth.

Sources:
Condon, C., & Saraiva, C. (2020, June 19). Fed's Rosengren Expects Main Street
Program to Build Over Time. Retrieved June 20, 2020, from
https://www.bloomberg.com/news/articles/2020-06-19/fed-s-rosengren-outlines-dark-
forecast-with-warning-over-virus

Lang, H. (2020, June 19). Why bankers remain unsold on Fed's Main Street program. Retrieved
June 20, 2020, from https://www.americanbanker.com/news/why-bankers-remain-
undecided-about-feds-main-street-program

Long, H. (2020, June 18). 'It's very discouraging': America's new $600 billion rescue
program for small businesses is off to a rocky start. Retrieved June 20, 2020, from
https://www.washingtonpost.com/business/2020/06/18/fed-main-street-lending/

Author: Andrew Fu

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2 thoughts on “Main Street Lending Program”
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