Fed eases terms of Main Street loans, says registration will begin soon

By Howard Schneider and Jonnelle Marte WASHINGTON (Reuters) - The U.S. Federal Reserve eased the terms of its 'Main Street' lending program on Monday, cutting the minimum loan size in half to $250,000 and lengthening the term by a year to encourage more businesses and banks to participate. The central bank also said registration for the program will begin soon and that lenders will be able to start making the loans to small and medium-sized businesses shortly thereafter.

Reuters June 09, 2020 05:05:15 IST
Fed eases terms of Main Street loans, says registration will begin soon

Fed eases terms of Main Street loans says registration will begin soon

By Howard Schneider and Jonnelle Marte

WASHINGTON (Reuters) - The U.S. Federal Reserve eased the terms of its "Main Street" lending program on Monday, cutting the minimum loan size in half to $250,000 and lengthening the term by a year to encourage more businesses and banks to participate.

The central bank also said registration for the program will begin soon and that lenders will be able to start making the loans to small and medium-sized businesses shortly thereafter.

The changes, which the Fed said was based on outreach with potential lenders and borrowers, address some of the concerns raised by lenders, lawyers and small business consultants that the previous minimum loan amount of $500,000 was too large to help many businesses affected by the coronavirus pandemic.

"Supporting small and mid-sized businesses so they are ready to reopen and rehire workers will help foster a broad-based economic recovery," Federal Reserve Chair Jerome Powell said in a statement.

The Fed is further minimizing downside risks for banks and credit unions by purchasing 95% of all loans issued through the program, rather than a range of 85% to 95%.

The new borrowing minimum may still not be low enough as some businesses need loans smaller than $250,000, Jill Castilla, president and CEO of Citizens Bank of Edmond in Oklahoma said on Twitter after the Fed announced the changes.

The Fed also extended the repayment period to five years from four, with no principal due until year two rather than after year one, which could help small businesses struggling due to the crisis.

The adjustments may not lead to increased demand from borrowers who previously qualified, said Matt Kulkin, co-chair of the financial services group at Steptoe & Johnson.

Some companies may be deterred by the Fed's disclosure of borrower information, or by limits on executive compensation, dividends or stock buybacks, said Kulkin.

(Reporting by Howard Schneider and Jonnelle Marte; Editing by Cynthia Osterman and Andrea Ricci)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.