Few companies have tapped the Fed's Main Street program
WASHINGTON — The Main Street Lending Program made just $95 million of loans in its first month of operation, the Federal Reserve Board said Thursday.
That is a far cry from the $600 billion allocated by Congress, through the Fed and the Treasury Department, to the rescue program for small and midsize businesses.
Fed Chair Jerome Powell has been candid that the program, which was aimed at helping companies with up to 15,000 employees stay afloat during the coronavirus pandemic, has gotten off to a lackluster start. He told Congress in June that the banks registered as lenders in the program weren’t “getting a ton of interest from borrowers.”
The Fed said two of the program's three arms — the new loan and priority loan facilities — had purchased eight loans worth $77 million in the first three weeks of operation, from July 6 to July 27.
The remaining $18 million of loans were apparently made by lenders and purchased by the program between from July 28 through Aug. 5.
The Main Street New Loan Facility issues loans up to $35 million, and the Main Street Priority Loan Facility issues loans up to $50 million. The Main Street Expanded Loan Facility allows banks to expand existing loans to borrowers up to $300 million. The expanded facility had not purchased any loans as of July 27.
According to data published Thursday by the Fed, the eight businesses that had taken advantage of the program as of July 27 included a dental office in Wisconsin, a construction company in Fort Lauderdale, Fla., a casino in Pennsylvania and a refrigeration company in Pembroke Pines, Fla.
Six of the eight loans were made through City National Bank of Florida, which is based in Miami.
The largest loan by far was made to Mount Airy #1 LLC in Mount Pocono, Pa., which runs the Mount Airy Casino Resort. FNCB Bank in Dunmore extended a $50 million loan to the company on July 13, which the Fed’s special-purpose vehicle purchased a 95% participation in on July 24.
The Main Street Lending Program, which was established using funding from the Coronavirus Aid, Relief and Economic Security Act, is offering loans of at least $250,000 to qualifying businesses with up to 15,000 employees or $5 billion in annual revenue.
Though the Fed has said the interest on behalf of lenders is “substantial,” bankers have reported that customers are not clamoring for the loans. One reason is that many smaller businesses don’t qualify: the maximum loan amount is partially determined by a borrower’s earnings before interest, tax, depreciation and amortization, and for small businesses, that number is often lower than the minimum loan amount of $250,000.
Powell acknowledged the lack of interest in a press conference last week, after the central bank announced it would extend the life of seven of its emergency lending facilities through the end of 2020.
“We haven't done as much lending as we thought,” he said, but he added that “it's important that the facilities stay in place until we're very confident that that the turmoil from the pandemic and the economic fallout are behind us.”