The Federal Reserve has announced it will provide up to $2.4 trillion in loans to shore up the Paycheck Protection Program (PPP) and the Main Street Lending Program. The Fed will extend credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value.
The additional funding will also ensure that credit flows to small and mid-sized businesses with the purchase of up to $600 billion in loans through the Main Street Lending Program. This program is designed to support small and mid-sized businesses that were in good financial standing before the crisis by offering four-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion.
Principal and interest payments will be deferred for one year. Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses. Firms seeking Main Street loans must commit to making reasonable efforts to maintain payroll and retain workers. Firms that have taken advantage of the PPP may also take out Main Street loans.
