WASHINGTON (AP) — The Federal Reserve announced Thursday that it was expanding a major lending program to provide support for businesses struggling to cope with the economic disruptions caused by the coronavirus pandemic.
The Fed said that it was expanding the scope and eligibility of its Main Street Lending Program which is designed to provide up to $600 billion in loans to small and mid-size businesses that have been harmed by the pandemic and the efforts to contain it.
The Fed said it was allowing businesses with up to 15,000 employees and $5 billion in annual revenues to qualify for loans. That is up from earlier limit of 10,000 employees and $2.5 billion in revenue.
The minimum loan size is being reduced to $500,000, down from an original minimum loan size of $1 million.
This support program, one of many the Fed has unveiled over the past two months, is designed to provide businesses with loans of up to four years from banks at below-market interest rates. Unlike a separate program being run by the Small Business Administration, the loans from the Fed must be repaid but payments can be deferred for one year.
The government has faced intense lobbying from industries hoping to get loans, which is a joint operation involving the Fed and the Treasury Department, which will provide money from the $2 trillion rescue program to cover loan losses the Fed might incur.
The Fed did not provide details on what the expansion will mean in terms of what types of companies may now qualify for the loans. The oil industry has been particularly active in trying to get support from the government’s loan programs.
The Fed’s Main Street Lending Program will be covered by requirements that the Fed disclose the companies getting the loans and the amounts involved on a monthly basis.
Those requirements were included by Congress in an effort to prevent the kinds of criticism generated by the 2008 financial crisis where big financial institutions got billions of dollars in support while individual Americans were losing their jobs and homes.