The Federal Reserve announced recently that it has established the Main Street Lending Program to support lending to small and medium-sized businesses that were in good financial standing before the onset of the coronavirus pandemic.

This new program is different than the previously announced Small Business Administration's Paycheck Protection Program (PPP). While PPP aid is intended to help a participating business through the near term (until June 30), a Main Street Lending Program loan can provide assistance for a longer period.

The Passenger Vessel Association said this week that it appears that many, if not most, of its members will be eligible to apply for a loan under this program. Even if a company has qualified for PPP aid, it can still seek a Main Street loan. The program offers four-year loans to companies that employ up to 10,000 workers or with revenues of less than $2.5 billion. Principal and interest payments will be deferred for one year.

The Main Street Lending Program should be operational in early May.

Unlike assistance under the PPP, a loan through the Main Street Lending Program will not be forgivable but will have to be paid back eventually.  Also, unlike the PPP, a recipient of a Main Street loan will not have to commit to maintaining a specific level of payroll and employees, but it must agree to make "reasonable efforts" to maintain payroll and retain workers.

An applicant for a Main Street loan must attest that it requires financing due to the exigent circumstances presented by the Covid-19 pandemic.

The loans are to be issued through banks and other traditional financial institutions. The allowable amount ranges from $1 million to $25 million. The loan term is a maximum of four years. One need not begin repayment until after the first year of the loan, and there is no prepayment penalty. An applicant must show some degree of creditworthiness, and there are some conditions as to how the business will operate during the life of the loan. For example, the borrower must agree to remain neutral in any union organizing effort while the loan is in force.

To encourage banks to make these loans, the federal government will assume liability for 95% of the amount in the event of a default.

The Main Street Lending Program is designed to enable up to $600 billion in new financing for businesses.  Not only will it encourage new loans, but it will also assist in extending existing loans.

Facts sheets about the Main Street Lending Program can be found here:
Main Street Lending Program fact sheet
2020 Treasury Department Press Release - Main Street