The Federal Reserve on Thursday announced a new $600 billion lending program for midsize businesses in an effort to help thousands of additional firms as part of $2.3 trillion in new funding actions designed to offset the negative impact of the coronavirus pandemic on the economy.
Under the Main Street Lending Program, the Fed said it will offer loans to companies with up to 10,000 workers and less than $2 5 billion in revenue. The loans will defer both principal and interest payments for the year. Banks will be able to take out new loans or increase the size of existing ones, and must retain a 5% share, selling the remainder to the Fed.
“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” said Federal Reserve Board Chair Jerome H. Powell. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”
Companies that take advantage of the program “must commit to make reasonable efforts to maintain payroll and retain workers,” the Fed said.
The program has been eagerly awaited because the Fed’s existing initiatives have focused on the stimulus package’s Payment Protection Plan, which provides forgivable loans to cover payroll and other operating expenses to businesses with fewer than 500 workers, as well as bailouts for large corporations such as airlines.
The Main Street Lending facility is aimed at helping thousands of additional midsize businesses.
The Fed also said Thursday it will:
► Set up a new $500 billion lending program for state and local governments.
►Provide additional funding for the PPP program for the small businesses
► Expand the types of collateral that can be used for a program that supports student, auto and credit card loans. Triple A rated tranches of commercial mortgage-backed securities and other assets can now be used for the facility, whose funding remains at $100 billion.
This story will be updated.