Months ago the Federal Reserve Bank began discussing offering loans to small businesses through the Main Street Lending Program. Now finally, they have opened registration for lenders to apply to the program. One other piece of great news for lenders is that they have expanded on their original plan, opening the doors to smaller loans and better repayment terms.
Below is the press release announcing the implementation of the program from the Federal Reserve:
June 15, 2020
The Federal Reserve’s Main Street Lending Program opened for lender registration this morning, the Federal Reserve Bank of Boston announced.
Lenders can find the necessary registration documents on the program site and are encouraged to begin making Main Street program loans immediately.
Eligible lenders can now register through the program’s lender portal, through which lenders will provide relevant identifying information, and sign and submit required registration forms and agreements.
The Main Street Lending Program, administered by the Federal Reserve Bank of Boston, intends to purchase 95% of each eligible loan that is submitted to the program, provided that the required documentation is complete and the transactions are consistent with the relevant Main Street facility's requirements. The Main Street Lending Program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020.
To participate in the program, lenders must register using the lender portal, which provides secure access and verification, and promotes the resilience of the program.
Business borrowers must apply for the program loans through a participating lender. Information for borrowers is available on the program website.
The Main Street Lending Program is designed to help credit flow to small and medium-sized businesses that were in sound financial condition prior to the COVID-19 pandemic but now face cash flow interruptions.
To assist businesses, the program offers five-year loans with floating rates, with principal payments deferred for two years and interest payments deferred for one year. To support a broad set of businesses, the loans range in size from $250,000 to $300 million.
Lenders will work directly with businesses to determine eligibility and loan approval.
By purchasing 95% of the loans, the Federal Reserve will share in the risk that it would otherwise need to be absorbed solely by lenders and will create additional balance sheet capacity for lenders to extend more loans.
The Main Street Lending Program will begin purchasing loan participations through the lender portal soon. When these purchases begin, all required transaction documents will be submitted through the lender portal.
Interested parties can visit www.bostonfed.org/mslp to find program information, including frequently asked questions, and can subscribe for e-mail updates. Inquiries about the program can be emailed to MSLP@bos.frb.org.
In addition, the Rules of Thumb blog from MoneyThumb has listed below changes to the original Main Street Lending Program:
- Lowering the minimum loan size for certain loans to $250,000 from $500,000;
- Increasing the maximum loan size for all facilities;
- Increasing the term of each loan option to five years, from four years;
- Extending the repayment period for all loans by delaying principal payments for two years, rather than one; and
- Raising the Reserve Bank’s participation to 95% for all loans.
If you are a lender, the Rules of Thumb blog from MoneyThumb suggest you run, don't walk, over to this registration page so that you can begin offering loans to small business borrowers in need. Please share this blog post on your social media page so that your peers in the lending niche can take advantage of this great news.