Fed Announces Expansion of CARES Act Main Street Program

The Federal Reserve Board on Thursday announced it is expanding the scope and eligibility for the Main Street Lending Program, a loan facility created by the CARES Act for small- and medium-sized businesses.  

In response to the public input, the Board decided to expand the loan options available to businesses and increased the maximum size of businesses that are eligible for support under the program. 

The changes include: 

• Creating a third loan option, with increased risk sharing by lenders for borrowers with greater leverage; 
• lowering the minimum loan size for certain loans to $500,000; 
• and expanding the pool of businesses eligible to borrow. 

Additionally, businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible, compared to the initial program terms, which were for companies with up to 10,000 employees and $2.5 billion in revenue. The minimum loan size for two of the options was also lowered to $500,000 from $1 million. With the changes, the program will now offer more options to a wider set of eligible small and medium-size businesses.

Under the new loan option, lenders would retain a 15% share on loans that when added to existing debt do not exceed six times a borrower's income, adjusted for interest payments, taxes, and depreciation and other appropriate adjustments. This compares to the existing loan options where lenders retain a 5% share on loans but have different features. 

Under all the loan options, lenders will be able to apply their industry-specific expertise and underwriting standards to best measure a borrower's income. In total, three loan options—termed new, priority, and expanded—will be available for businesses. The chart below summarizes the different loan options. 

A start date for the program will be announced soon.