Fed takes big step toward launch of Main Street Lending Program
WASHINGTON — The Federal Reserve Bank of Boston published a trove of new documents for lenders looking to participate in the upcoming Main Street Lending Program, in a sign the U.S. central bank will soon launch the highly anticipated loan program for small and midsize businesses.
The Boston Fed published an updated set of frequently asked questions and loan participation agreement documents, as well as lender certifications and covenants for each of the three lending facilities that will be available through the program.
The Federal Reserve announced the $600 billion Main Street Lending Program in April, saying the central bank would backstop coronavirus relief loans for middle-market firms with no more than 15,000 employees or $5 billion in annual revenue.
Businesses that meet those qualifications and were in good financial condition before the COVID-19 outbreak would be eligible for loans of at least $500,000 through one of the three component facilities. The Fed will then buy either 95% or 85% of a loan to free up lenders' balance sheets.
Banks will ultimately choose whether to make loans through the program. The Fed’s new set of documents published Wednesday night could offer lenders more clarity and inform their decision on whether to participate.
In the new documents, the Fed clarified that in most instances lenders do not have to verify a borrower's certification of eligibility.
Additionally, the Fed's special-purpose vehicle that will purchase the loan participations is waiving its right to “special administrative priority” in the event of a borrower’s bankruptcy.
The Fed is also holding an “Ask the Fed” webinar June 4 to provide lenders with more details about the Main Street Lending Program.
The central bank has not announced when the program will officially be up and running, but Boston Fed President Eric Rosengren said Sunday that he expects businesses to begin receiving loans through the program within two weeks.