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Updated November 4,2020
The Federal Reserve's Main Street Lending Program
In response to Coronavirus Disease 2019 (COVID-19), the
Federal Reserve (Fed) created a series of emergency
lending programs, including the Main Street Lending
Program(MSLP). The MSLP supports lending to eligible
businesses andnonprofits and marks the first time the Fed
has lent to nonfinancial businesses since the 1930s (though
it purchased commercialpaper [short-termdebt securities]
is suedby nonfinancialbusinesses in 2008 and 2009).
Due to the effects of COVID-19, the U.S. economy has
experienced a sudden and deep recession. The
unemploymentrate has reached its highest level since the
Great Depression, and the decline in output in the second
quarter of 2020 was record-breaking. Normal commerce
was severely disrupted starting in March andhas only
partially recovered in the following months. Social
distancing and fears of the virus hit many main street
businessesin retail and hospitality industries particularly
hard. Many disrupted businesses, even if s olventprior to
COVID-19, began to experience cash flow problems and
faced difficult decisions abouthow to stay in business.
One of the unique andproblematic characteristics of the
current recession is thatit is driven by apublic health crisis.
When thepublichealthcrisis passes, surviving businesses
may be able to fully reopen, but when that might occur is
highly uncertain. It is therefore risky for a private lender to
provide a loan to a main street business, as it is uncertain
if and when that business would be able to pay the loan
back. Meanwhile, cash-strappedbusinesses need funds
quickly to remain in business and retain employees. In
addition, many businesses may need to defer payments on
existing loans. Business closures wouldworsen an already
historically high unemployment situation. For these
reasons, policymakershave implenentedprograms tohelp
struggling businesses and maintain employment levels. The
MSLP is one such programintended to meet the needs of
businesses of acertain size.
Mam Str* et Lending Prg
Under the MSLP, the Fed purchases loans with certain
characteristics that depository institutions, such as banks,
have made to businesses and nonprofits. The MSLPis
targetedto mid-sized U.S. firms that were too large to be
eligible for the CARES Act's (P.L. 116-136) Paycheck
Protection Program(PPP) but too small to issue bonds or
commercial paper, which the Fed is purchasing through
other emergency programs. Although firms that do not fit
this description can also be eligible, it was perceived that
there was a gap in relief that the MSLP could fill. In
addition, there was little federalrelief for nonprofits too
large for the PPP untilthe MSLP was expanded. The MSLP
and PPP are comparable in some ways, and some
businesses are eligible forboth programs. However, there
are differences in eligibility requirements, interest rates, and
loan terms, among others (see Table 1).
Table I. MSLP and PPP Comparison
MSLP PPP
Business/ 15,000 or fewer 500 or fewer
Nonprofit Size employees, or 2019 employees, or net
Limits revenues of $5 worth is $15 million
billion or less or less and average
For nonprofits: net income for past
minimum 10 two fiscal years is
employees $5 million or less
Interest Rate LIBOR + 3% 1%
Loan Term 5 years Prior to June 5:
2 years; after June 5:
5 years
Loan Size $100,000 - $300 Up to $10 million
million or 2.5 times average
monthly payroll
Payment Principal deferred 6 month deferral
Deferral/ for two years, and loans will be
Forgiveness interest deferred forgiven if all
for one year; not employee retention
forgivable and other criteria
are met
Amount $3.7 billion (as of $525 billion (when
Outstanding 10/30) program ended)
Application December 3 1, 2020 August 8, 2020
Dead line
Sources: Federal Reserve and the Small Business Administration.
Notes: For brevity, the table omits some eligibility criteria.
As shown in Table 1, some ofthe main features ofMSLP
loans are eligibility based on firmsize and deferment of
principal and interest payments. TheMSLPoperates five
facilities based on whether the loan is new or refinanced,
whether the borrower is a business ornonprofit, and based
on how indebted the borrower is. Each facility has different
loan terms (such as maximum loan size, which varies from
$35 million to $300 million). There is no minimum
businesssize. However, there are minimumloan sizes,
which, depending on the facility, are between $100,000 and
$10 million. (To date, most loans have been over $1
million.) On October 30, 2020, the Federal Reserve loweired
the loan size requirement to $100,000 from $250,000 to
better target support to smallbusinesses that may have been
too indebted to meet leverage requirements previously.
Certain businesses are ineligible if they are in industries
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