While the Paycheck Protection Program may have run dry, another program from Congress’ $2.2 trillion coronavirus aid package may still provide relief, at a cost.
The Federal Reserve’s Main Street Lending Program is providing roughly $600 billion in loans to businesses, with interest rates ranging from 2.5% to 4%. Unlike the PPP, the repayment term for a Main Street loan is four years and the loan can’t be forgiven.
There are two loans available through the lending program: the Main Street New Loan Facility for new loans and the Main Street Expanded Loan Facility for borrowers who have an existing small business loan from before April 8. Loans vary between $1 million and $25 million.
The program is considering applications from businesses that made less than $2.5 billion last year and employs less than 10,000 employees.
Like the PPP, businesses that take the loans are prohibited from using the funds to repay or refinance existing debt, and Inc. warns that businesses are also required to first pay off the Main Street loan before repaying other loan commitments that have an equal or lesser priority.
Other criticisms of the program are that the loans are too large and that participation requires the company to adhere to certain compensation restrictions. Main Street loan holders are required to freeze salaries for employees that make between $425,000 and $3 million.
Businesses that are interested in the program should contact their banker. The Federal Reserve is expected to release updated confirmed guidance on both Main Street lending programs next week, according to the Baton Rouge Area Chamber, which included the program in its Guide to COVID-related Federal Legislation.
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April 20, 2020 at 10:19PM
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Main Street loans still available - Greater Baton Rouge Business Report
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