The Fed wants to lend money to more small businesses, but many aren’t interested
Share Now on:
The Federal Reserve is making some changes to its Main Street Lending Program, which is supposed to be for small and midsized businesses.
It hasn’t been nearly as popular as the Paycheck Protection Program — the Fed has only made around 400 loans so far. Now, it says it’s lowering the minimum amount businesses can borrow to $100,000.
By allowing businesses to take out smaller loans, the Fed says it’s hoping more businesses will participate.
“We can definitely find places to use the money,” said Ashwin Deshmukh, owner of the Manhattan cocktail bar Short Stories. He said he’s in the process of applying for a Main Street loan.
Unlike his Paycheck Protection Program loan, this one would not be forgivable, and it would have to be paid back in five years.
“It gives us a little pause to take on something we have to pay back on like a five-year basis, when most businesses don’t know if they’re going to be around in five months, let alone five years,” Deshmukh said.
The loan’s interest rates are north of 3%.
Matt Hetrick runs the accounting firm Harmony Group. “You’re talking about loans that have terms that are very, very similar to loans that you’d get from banks, say, before the pandemic.”
There are some businesses that could benefit from the Fed’s program, said John Lanza at the accounting and advisory firm CohnReznick, like bigger businesses with a few hundred employees and businesses that had plans to expand before the pandemic.
“We hope to open up a new location in the end [of] 2020. We hope to start a new business in 2021,” Lanza said. “These funds could potentially be used for that.”
But that brings us back to the issue of business confidence. Hetrick said in today’s environment, “there can’t be a lot of businesses out there, especially in the small business community, that are sitting there saying, ‘Hey, I feel a lot better about what I can see four years from now; I’m going to be great.'”
Two bankers who deal with many small businesses told me they just don’t see any point in their clients hitting up the Main Street Lending Program.
COVID-19 Economy FAQs
Are states ready to roll out COVID-19 vaccines?
Claire Hannan, executive director of the nonprofit Association of Immunization Managers, which represents state health officials, said states have been making good progress in their preparations. And we could have several vaccines pretty soon. But states still need more funding, she said. Hannan doesn’t think a lack of additional funding would hold up distribution initially, but it could cause problems down the road. “It’s really worrisome that Congress may not pass funding or that there’s information circulating saying that states don’t need additional funding,” she said.
How is the service industry dealing with the return of coronavirus restrictions?
Without another round of something like the Paycheck Protection Program, which kept a lot of businesses afloat during the pandemic’s early stages, the outlook is bleak for places like restaurants. Some in the San Francisco Bay Area, for example, only got one week of indoor dining back before cases rose and restrictions went back into effect. Restaurant owners are revamping their business models in an effort to survive while waiting to see if they’ll be able to get more aid.
How are hospitals handling the nationwide surge in COVID-19 cases?
As the pandemic surges and more medical professionals themselves are coming down with COVID, nearly 1 in 5 hospitals in the country report having a critical shortage of staff, according to data from the Department of Health and Human Services. One of the knock-on effects of staff shortages is that people who have other medical needs are being asked to wait.
As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.
Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.
Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.