CSC-Blog-Main Street Lending Program_112020

Main Street Lending Program Changes Announced

The ongoing pandemic is wreaking havoc with many aspects of “normal” life, and small businesses are one of the demographics that is really suffering. Before getting into the topic at hand — the changes made to the Main Street Lending Program — here are some statistics about small businesses to digest:

  • The 30.7 million small businesses in the U.S. account for 99.9 percent of all U.S. businesses.
  • Small businesses create 1.5 million jobs annually — accounting for 64 percent of new jobs created in the U.S.
  • More than 90 percent of the business population represents small and medium-sized businesses.
  • Over 50 percent of small businesses fail in their first year — and more than 95 percent fail within the first five years.

All those numbers are from 2019, before the pandemic. What has happened since is nothing short of catastrophic — as COVID-19 has rendered 31 percent of small businesses in the U.S. non-operational. While those still in business are taking steps to adapt to the new reality — in particular, increasing online activities — 28 percent of small business owners say cash flow will be their biggest challenge in the near future.

And so we come to the Main Street Lending Program, initiated by the Federal Reserve in April to support small and medium-sized businesses and nonprofit organizations that were in sound financial condition before the pandemic. Since its inception, it has made nearly 400 loans totaling $3.7 billion, with an average loan of $9 million.

To encourage banks to participate, the Federal Reserve is buying 95 percent of new or existing loans to qualified employers, while the issuing bank keeps 5 percent to discourage irresponsible lending. In exchange for the loan, employers must make reasonable efforts to maintain payroll and retain workers.

However, after some businesses pressed for greater access to the program, the Fed listened. In late October, it lowered the minimum loan amount from $250,000 to $100,000, and also reduced fees.

The previous eligibility requirements remain. Businesses must:

  • Be a U.S. company established before March 13, 2020
  • Have fewer than 15,000 workers, or $5 billion or less in 2019 revenue
  • Have not received support under Subtitle A of Title IV of the CARES Act
  • Not have participated in the Primary Market Corporate Credit Facility
  • Not be an ineligible business under the Paycheck Protection Plan

With no end in sight yet for the pandemic — and things actually starting to tighten up again as virus numbers soar — many small businesses will be hard-pressed to make it through to “the other side.” If you have questions about the Main Street Lending Program, please contact Clear Skies Capital at 800-230-9822 or and someone from our Client Services team will promptly respond.