The Federal Reserve expanded the $600 billion Main Street Lending Program to include larger businesses, and lowered the program’s minimum loan threshold, the cental bank said Thursday.
Businesses with up to 15,000 employees and $5 billion in revenue are now eligible to apply for the loans. That's up from the previous caps of 10,000 employees and $2.5 billion in revenue the agency announced last month.
The Fed cut in half — to $500,000 — the minimum loan amount for the program, which is part of the $2.2 trillion CARES Act.
The Federal Reserve said it is implementing the changes after it received more than 2,200 comment letters from individuals, businesses and nonprofits. The Fed has not yet announced a start date for the program.
However, the new minimum loan amount is not low enough, some industry leaders said.
In a series of tweets, Jill Castilla, CEO of Citizens Bank of Edmond in Oklahoma, said the program’s $500,000 minimum needs to be reduced.
"I've been advocating for $25k," she tweeted Thursday. "Small business owners, you need to speak out on this. While #smallbiz is focused on #PPPloans, the Main Street Lending Program will be the next line of help."
Other changes to the program include a new priority loan, where a business can borrow up to $25 million, or six times 2019 adjusted earnings before taxes, interest, depreciation and amortization (EBITDA).
Priority loans come with more risks for banks, which would be required to keep 15% of the loans on their books.
The Fed’s two other loan options, dubbed new loans and expanded loans, require banks to keep only 5% of the loan on their books.
American Bankers Association President and CEO Rob Nichols said the changes should broaden participation in the program. However, he encouraged the Fed and Treasury Department to consider additional adjustments including "further lowering the minimum loan size, increasing flexibility in loan terms and offering additional reference rate options."
"Doing so would increase bank participation and allow this program to reach even more small and midsize businesses in need," he said in a statement.
Meanwhile, the Fed allowed additional lenders to access to its Paycheck Protection Program (PPP) Liquidity Facility, it said Thursday. The announcement comes as welcome news to fintechs and other nondepository institutions involved in the Small Business Administration’s small-business relief program.
Since the start of the first funding round last month, nonbank lenders have worried they would reach capital limits before helping all their clients.
Under the Fed’s credit facility program, the central bank will take the PPP loans as collateral at face value.