Can the new Federal Reserve programs help your business?
Updated: Apr 15, 2020
Posted by: Anthony Faraco, Esq.
Date: April 11, 2020
In addition to Congress passing relief packages for American businesses (i.e. PPP; EIDL), the Federal Reserve is pulling its own levers to boost the economy. In the last few weeks, the Fed has announced its most aggressive measures in history; unveiling over $2.3 trillion in new lending programs. One specific program that is meant to directly assist American businesses is the Main Street Lending Program, which the Fed has put aside $600 billion for.
The Main Street Lending Program is purely a loan program, in contrast to the PPP which has forgiveness provisions. If your company either doesn't qualify for the PPP loan or if it isn't enough money in your business' pocket, then this new Fed program is another route that should be considered.
The Main Street loans offer 4-year terms with interest and principal payments deferred for one year. Any business that has 10,000 or fewer employees and less than $2.5 billion in yearly revenue are eligible. All eligible businesses can receive a loan of at least $1 million and up to $25 million (with few caveats). Additionally, the loan may not exceed 30% of the borrower's "existing outstanding and committed but undrawn bank debt." The interest rates are set at the adjustable rate of the Secured Overnight Financing Rate (which is set at .01% as of this writing), plus 2.5 to 4 percentage points. The loans can also be paid off early without a penalty.
This program is currently in the commenting phase until April 16 and is expected to begin in earnest at the beginning of May. Although this program may not be right for every business, it is something that should at least be considered.
For any additional details or questions please reach out so we can help your business thrive during these tumultuous times.