For more information on this topic, check out our webinar "COVID-19 Economic Stimulus Update- Smart Spending for Loan Forgiveness" on April 28. You can register here.
Businesses everywhere are looking for relief in the wake of this unprecedented crisis. When Congress announced $2 trillion in funding through the CARES Act, many small businesses saw an opportunity to keep employees on the payroll and keep their doors open.
The Paycheck Protection Program (PPP) was created (under the CARES Act) to offer nearly $350 billion in forgivable loans to businesses with 500 or fewer employees. When applications went live the first week in April, the SBA was flooded with PPP applications. At Divvy, we worked tirelessly to create an all-digital PPP application that would help businesses get as close to the front of the line as possible—whether they were Divvy customers or not.
However, the demand for PPP loans was so high that funds were exhausted less than two weeks after the applications opened. Congress is already in talks to fund another $250 billion in SBA loans (including PPP loans and Economic Injury Disaster Loans).
While businesses are hopeful that additional PPP funding is on it’s way, the Federal Reserve also announced the creation of the Main Street Lending Program, an additional $600 billion in lending facilities to small- and mid-sized businesses.
- What you need to know about the Main Street Lending Program:
- Mid-size companies with up to 10,000 employees or up to 2.5 billion in revenue are eligible
- Minimum borrowing amount is $1 million
- Maximum borrowing amount is $25 million for new loans ($150 million for loan expansions)
- Loans mature at 4 years
- Interest rates vary between 2.5% and 4% (based on SOFR + 250-400 basis points)
- Payments are deferred for 1 year (including principal and interest)
Main Street loans are structured like more traditional loans, though interest rates are low and payments deferred for a full year. Businesses can qualify for this funding even if they’ve applied for the PPP. Main Street loans will be issued through regular banks, who will in turn sell 95% of the loan back to a special purpose vehicle created by the Fed.
Specific processes for the Main Street Lending Program are still evolving, but the program is set up to be a great boon to mid-sized businesses with between 500 and 10,000 employees.
And should the PPP receive another round of funding, help your clients that still need to apply to the program submit their applications using the Divvy application process to get fully ready and in line.
For more information on this topic, check out our webinar "COVID-19 Economic Stimulus Update- Smart Spending for Loan Forgiveness" on April 28. You can register here.