While many small businesses (including a number of our clients) are racing to apply for federal government Covid-19 loans administered by the SBA, other business owners who run midsize companies (with between 500 and 10,000 employees and $10 million to $2 billion in revenue) too large for the SBA programs are still waiting for details on lending programs that will work for them. Bridge financing to help midsize companies get through the virus shutdown is essential to mitigate the loss of jobs and number of business failures.
The Federal Reserve has already announced a number of programs (click here). However, the Fed has not yet released details about the “Main Street Lending Program”, which will be aimed at midsize companies.
The Main Street Lending Program is expected receive at least $100 billion in initial funding and could result in as much as $1 trillion in new loans for midsize companies at interest rates of 2 percent to 2.5 percent with a five-year repayment window. However, the Fed hasn’t yet provided details yet, much less an announcement on the timeline for deployment of the program.
Funds from the Main Street Lending Program will flow through banks, where companies will apply directly for the loans. No word yet on what the loan sizes will be and whether they will come with restrictions, such as those that exist with the SBA’s Paycheck Protection Program (PPP). PPP loan borrowers must agree to use at least 75 percent of proceeds to pay employee salaries or fund benefit programs.
We will provide more details when they are released by the Fed.