Bailing Out Businesses: The Main Street Lending Program
As COVID-19 rattled the world and left an estimated 30 million people vulnerable to unemployment, the hit was particularly sharp for small businesses. Companies with less than 500 employees are predicted to have been left the most likely to suffer job loss and unable to keep their doors open for business, even as lockdown restrictions begin to lift.
Although the country is beginning to slowly return to normal as quarantine lifts and re-openings start to happen, it is certainly not business as usual. Precautions must be taken, and spending has significantly decreased, leaving the majority of small business owners still scraping to get by.
Small businesses account for a shocking 54% of the 30 million vulnerable jobs in the United States. Making it essential to the economy that the government plays a hand in keeping as many as possible from going out of business and closing their doors for good. Furthermore, there is an added danger that the closing of small businesses and related loss of jobs will affect those who are least able to afford it since average workers in these occupations typically have a lower income and smaller savings.
Last week, the Federal Reserve announced that it will expand the terms of its Main Street Lending Program to make it more accessible to any business in need of assistance. The program is designed to “support lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic.” It is designed to help the economy by relieving smaller companies; specifically, those with less than 15,000 employees or a 2019 annual revenue of less than $5 billion.
According to Jerome Powell, Chairman of the Federal Reserve, the Main Street Lending Program is one of the biggest COVID-19 related challenges they have faced. The program needs to be balanced so that the loan terms are strict enough to ensure companies will pay the money back, but not so strict that they deter participation.
In order to broaden the spectrum of businesses that can benefit from the program, some changes have been announced, including reducing the minimum and increasing the maximum loan amounts and extending the repayment period from four to five years.
Eligibility requirements to qualify for a loan through the Main Street Lending Program include:
The business must be established prior to March 13th, 2020.
Must be a U.S. business
May only participate in one of the Main Street facilities
Must not also participate in the Primary Market Corporate Credit Facility (PMCCF)
Must not have received specific support pursuant to the CARES Act
Must be able to make all certifications and covenants required
How to apply for a Main Street Loan
Eligible businesses can apply directly through their lender, although exact details about the process have not yet been released by the Federal Reserve. It is likely that the application process will vary by bank, but it is strongly recommended that businesses apply with the bank that they already currently work with.
There still is not an announced launch date for when to start applying for a loan, but it is a good idea to be prepared by gathering 2019 payroll filings and payroll records detailing compensation expenses and a total number of employees. Having everything ready to go could save a significant amount of time once an application date is announced, so while specific details about exactly what will be required haven’t yet been released, the best way to prepare will likely be to gather any and all documentation that supports your need for a loan.
If you are wondering how COVID-19 is going to affect your real estate, let our team help you out. For legal guidance with your mortgage, residential or commercial real estate needs, get in touch with a real estate attorney at Lee Scott Perres, P.C.
