As businesses race to apply for government-backed Covid-19-relief loans as part of the $2 trillion stimulus package, many business owners--those 200,000 or so who run midsize companies--are eagerly waiting for details on the lending program in the works specifically for them.
While the Federal Reserve has already outlined a number of programs at which it will deploy $454 billion in resources, it has not yet released details about the Main Street Lending Program, which will be aimed at firms with between 500 and 10,000 employees and $10 million to $2 billion in revenue.
"This will be probably the most popular program of all the crisis programs that are being put forward because it does involve Main Street," says Joe Brusuelas, chief economist at RSM, a consultancy focused on middle-market businesses in Chicago. "It certainly has a different set of optics than bailing out Boeing."
The Main Street Lending Program, which Brusuelas expects will get at least $100 billion in federal funding at the outset, could result in as much as $1 trillion in new loans for midsize companies. He also anticipates that loans under the program would come with "bargain basement" interest rates of 2 percent to 2.5 percent and have a five-year repayment window.
Given the urgency of all this, one key question is just when this program will launch. Based on his conversations with banking officials, Brusuelas says the Fed could roll out the program to banks as early as April 3, with the aim of getting the program up and running within a week. On April 1, Federal Reserve Bank of Boston President Eric Rosengren said the rollout may still be a couple more weeks away. The Federal Reserve declined to provide Inc. insight into the timeline of its announcement of the program.
Ultimately, "time is of the essence," says Brusuelas. "Speed really matters here with respect to the evolution of this crisis and the financial hardship that small- and medium-sized enterprises are facing because that's the population of firms from where that increase in the initial jobless claims are coming." He is referring to the 10 million jobless claims that the U.S. logged during the month of March. That's more than in the two years of the financial crisis combined.
The funds from the Main Street Lending Program are expected to flow through the nation's top banks, where businesses would need to apply directly for the loans. Other details midsize businesses are eager to find out is what the loan sizes will be and whether they will come with restrictions, such as those that exist with the SBA's Paycheck Protection Program. For a loan to be forgiven through that program businesses must agree to use at least 75 percent of a loan's proceeds to pay employees' salaries or fund benefit programs, among other payroll activities.