Dear Clients, Business Associates and Friends:

The Federal Reserve has changed the terms of its Main Street lending program to allow for greater participation for both smaller and bigger loans.

On Monday, June 8, 2020, the central bank said it is lowering the initially stated minimum loan and raising the maximum that can be borrowed, plus is expanding the loan terms to five years. The program is part of the Fed’s efforts to get money to small and medium-sized businesses hurt during the Coronavirus induced recession.

Under the new guidelines, the minimum loan now will be $250,000, half the amount under previous versions of the plan. The maximum will now vary by facility but could be up to $300 million from the previous $200 million.

In addition to the changes in loan size, the Fed also has extended the repayment period from four years to five years and will delay the repayment period to two years from the original one year. Interest also is delayed for one year and will be Libor, a commonly used overnight lending rate, plus 3%. Lenders will now assume just 5% of the loans, with the Fed holding the rest.

The program is part of a dozen measures the central bank has taken to boost lending and liquidity during the Coronavirus crisis. The Fed has “lending but not spending” powers. Main Street and other similar programs are being backstopped by Treasury money that the Fed can leverage up. In this case, the Treasury is providing $75 billion in equity that can be used for $600 billion in lending.

AS ALWAYS, WAGNER & ZWERMAN IS HERE TO ANSWER ALL OF YOUR QUESTIONS AND CONCERNS. WE ARE ALL IN THIS TOGETHER.

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Best,

WZ Partners