United States: Main Street Lending Program: When Will It Launch?

On April 8, 2020, the Treasury Department and the Federal Reserve first announced their new joint "Main Street Lending Program" intended to provide support lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic. On April 30, 2020, the Federal Reserve updated and revised term sheets for three programs, the Main Street New Loan Facility, the Main Street Expanded Loan Facility and the Main Street Priority Loan Facility, and also issued a FAQ, noting that the program had still not launched. As of May 22, 2020, the Main Street Lending Program has still not launched and the big question is when will it launch?

In testimony to the Senate Banking Committee on May 19, Chairman Powell of the Federal Reserve said that the Main Street Lending Program (along with a municipal lending and other programs) would be up and running by the end of May or in the first week of June.

The Federal Reserve is currently working to create the infrastructure necessary to operationalize the Program, and to fine-tune the program, including extending it to nonprofits. It has been reported that the Federal Reserve is also preparing to lend directly to middle-market businesses, filling a hole left by the government's economic crisis relief efforts, and it is shaping up to be one of the trickiest things it has ever done.

Powell said that the Federal Reserve has been soliciting feedback from the public in designing the Program. The Federal Reserve has never established such a facility, setting up a logistical challenge for a central bank that has more experience with bond markets than direct loan underwriting.

In any event, the Federal Reserve's Main Street page says that once the Program is operational, small and medium-sized businesses interested in the Program should seek to apply for Program loans from an eligible lender. The same page goes on to say that the Federal Reserve will publicly issue a form loan participation agreement, form borrower and lender certifications, and other form agreements that are necessary to implement the Program in accordance with the term sheets. The Federal Reserve will not provide form loan documents for eligible lenders to use when making eligible loans to eligible borrowers. Rather, eligible lenders should provide these documents.

The Federal Reserve has already adjusted the terms of its loan programs several times, and Powell said the central bank would continue to adjust the terms for those operations "as we learn more."

We will continue to provide updates on the Main Street Lending Program as developments arise and once the Program becomes operational. You can see our Comparison Chart for Main Street New Loan Facility, the Main Street Expanded Loan Facility and the Main Street Priority Loan Facility here, or see all of our CARES Act and COVID-19 resource center content here.

Do not hesitate to contact us for more information on the Main Street Lending Program.