More than two weeks ago, the Federal Reserve launched its long-awaited $600 billion Main Street Lending Program, designed to help small and midsize businesses weather the coronavirus-induced recession. But so far, interest in the program has been sparse, according to a report Wednesday in the Wall Street Journal.
Through the program, commercial banks that take part would underwrite and process five-year loans of between $250,000 and $50 million at an interest rate that currently stands between 3.17% and 3.3%. The central concern, many banks say, is that companies who could really use the cash are unlikely to be approved for the program, whereas more creditworthy borrowers are likely to find similar or better terms elsewhere.
Federal Reserve Chairman Jerome Powell said in a congressional hearing Tuesday that roughly 300 lenders have started registering for the Main Street program. Still, almost 11,000 federally insured banks and credit unions could be eligible, the WSJ reported.
“We’ve had a lot of interest,” Powell said. “What the banks tell us, though, is sort of a mixed thing. They’re not getting a ton of interest from borrowers.” He noted that the Fed is open to making further adjustments to the program.
The slow start for the Main Street program contrasts sharply with the thousands of lenders that applied for the Small Business Administration’s Paycheck Protection Program when it launched in early April. Since its launch, the PPP has doled out more than $500 billion.
The Senate voted Tuesday evening to extend the PPP’s application deadline until Aug. 8. The legislation now heads to the House, although a vote there is likely to be delayed due to the July 4 holiday.
“The resources are there,” Sen. Benjamin L. Cardin (D-MD) told the New York Times.“The need is there. We just need to change the date.”
