Fed widens Main Street Loan Programme to reach more businesses

[WASHINGTON] The Federal Reserve is expanding the scope of its Main Street Lending Programme to help more borrowers become eligible, as it seeks to keep credit flowing to the US economy during the coronavirus pandemic.

The central bank said Thursday that businesses with up to 15,000 employees or up to US$5 billion in annual revenue are now eligible, in effect doubling the revenue limit from previous guidelines and raising the employee limit by 5,000.

The move follows calls for the programme to be widened from US lawmakers and the business community after the Fed initially announced terms of who would qualify - including heavy lobbying from key industries that have been hammered by the economic lockdown.

The Fed said a start date for the Main Street programme would be announced soon.

The minimum loan size was lowered to US$500,000 from US$1 million, and a third loan option for more leveraged companies was added. Under the new loan option for more levered firms, lenders would retain a 15 per cent share on loans that when added to existing debt do not exceed six times earnings adjusted for interest, taxes and depreciation.

Treasury Secretary Steven Mnuchin said last week he's considering an additional lending facility for troubled US energy companies. The adjustments on the Fed facility might encompass some of those firms. The Fed's reading of its emergency lending authority has been that it doesn't permit the central bank to erect a facility to support a specific industry.

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The central bank has announced nine emergency loan programs to help keep credit flowing during the pandemic, of which four are now up and running.

BLOOMBERG