Fed Lowers Main Street Loan Amount


Fed Chair Jerome Powell speaks to reporters in October 2019. Photo courtesy of the Federal Reserve.

In a move aimed at reaching more small businesses, the Federal Reserve Board has reduced the minimum loan amount for the Main Street Lending Program.

Businesses and nonprofit organizations will now be able to get loans for $100,000, down from the previous minimum loan amount of $250,000. The Fed said in a statement that the adjusted loan terms would “better target support to smaller businesses that employ millions of workers and are facing continued revenue shortfalls due to the pandemic.”

The fed also adjusted fees “to encourage the provision of these smaller loans,” the statement said. According to the term sheets for the Main Street New Loan Facility and Priority Loan Facility, loans for less than $250,000 will have no transaction fee, while loans for $250,000 or greater have a 1 percent transaction fee that lenders pay to the Fed’s special purpose vehicle. The loan origination fee that borrowers pay to the lender will be up to 2 percent of the principal amount on loans less than $250,000, according to the term sheets. For loans of $250,000 or greater, the loan origination fee will be up to 1 percent.

The Fed and the Treasury Department also clarified the effect of Paycheck Protection Program loans on the maximum size for Main Street loans. Small businesses may be able to exclude PPP loans of up to $2 million, if certain requirements are met, when determining the maximum Main Street loan size. This move “should also help smaller businesses access Main Street loans,” the Fed said.

Loan documents reflecting the new terms are expected to be available to registered lenders within the next week.

The Main Street program has made almost 400 loans totaling $3.7 billion in a wide range of industries. The program was established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the CARES Act.

The program, which is administered by the Boston Fed, is for small and medium-sized for-profit businesses and nonprofit organizations that were in sound financial condition before the COVID-19 pandemic but lack access to credit on reasonable terms. The program offers several five-year loan options, with deferred principal and interest payments for qualified businesses and nonprofits.