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Fed lowers minimum loan level for small business loan program



On Tuesday, August 18, 2020, the Marriner S. Eccles Federal Reserve Building is located in Washington, DC, USA.

Irene Scott | Bloomberg via Getty Images

The Federal Reserve lowered barriers to small business loan programs, which is part of the appeal of expanding the use of sparse loans.

The Federal Reserve made another adjustment to the main street loan program on Friday, saying it will lower the minimum loan amount from $250,000 to $1

00,000 and will relax debt restrictions on companies that have participated in the “Pay Protection Program.”

The plan is designed to help small and medium-sized enterprises survive the Covid-19 pandemic. So far, it has issued nearly 400 loans totaling US$3.7 billion. The total capacity of MSLP is US$600 billion, thanks to the US$75 billion mortgage provided by the US Treasury Department.

The Fed said in a press release that these changes are “two important ways to better shift support to small businesses that employ millions of workers and face persistent income shortages due to the pandemic.”

The Main Street project is part of a series of facilities launched by the Federal Reserve shortly after the pandemic escalated in early March.

However, both borrowers and lenders complain that certain conditions of the loan are too strict and the handling fees are more onerous than they are willing to pay. In many cases where PPP loans can be forgiven, Main Street loans cannot, which further weakens their appeal.

When calculating the applicant’s debt burden, other changes other than the minimum loan requirement can waive up to US$2 million in PPP loans. The Fed also stated that it is adjusting fees to “encourage the provision of these smaller loans.”

This move comes as people are increasingly worried that the economic slowdown will enter the winter season due to the increase in coronavirus cases and the continued impasse on Capitol Hill due to further financial relief. Fed officials have repeatedly called on Congress to take more stimulus measures, but the White House and Congressional Democrats have failed to reconcile their competing proposals.

Main Street loans are for companies with fewer than 15,000 employees or with revenues not exceeding US$5 billion in 2019. In addition to this plan, the Federal Reserve has been buying corporate bonds, issuing loans and injecting liquidity in various markets.


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