Future Uncertain for Main Street Loan Program

Thoughtware Alert Published: Aug 14, 2020
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On August 6, 2020, the Federal Reserve released its first status report on the Main Street loan program, followed on August 7, 2020, by a Congressional Oversight Commission hearing. Main Street was intended to help larger, financially solid businesses negatively affected by the COVID-19 pandemic—firms too large to qualify for the U.S. Small Business Administration’s Paycheck Protection Program (PPP) and not big enough to access capital markets. Unlike the PPP, which covers businesses with a maximum of 500 employees for core expenses like payroll and rent, Main Street covers businesses with up to 15,000 employees for all expenses, including financing and inventory.

The $600 billion facility was announced with great fanfare in April, but demand from borrowers and lenders has been anemic. The facility details were substantially updated several times to make the program attractive to both lenders and borrowers, and the program has been extended from September 30, 2020, to December 31, 2020.

The status report, as of July 31, 2020, indicates that $80 million has been disbursed to eight borrowers. At the hearings, the Boston Fed president testified that more up-to-date information showed that 54 loans were in the pipeline totaling a potential $530 million. So far only 509 financial institutions have registered for the Main Street program versus the PPP’s 5,461 lenders.

Several factors contributed to the lack of demand:


  • Main Street loans are not grants and cannot be forgiven. 
  • The interest rate is set at LIBOR plus 3 percent with up to 200 basis points in fees. Financially stable companies can currently access better rates. 
  • The five-year maximum term is seen as too short for an extended economic downturn.
  • Borrowers must make commercially reasonable efforts to maintain employment and are prevented from share buybacks and dividends and compensation increases for highly paid executives for the five-year loan term. 
  • Lender approval is based on meeting the program terms and the lenders’ own underwriting standards. There is anecdotal evidence that entire sectors have been rejected by lenders, most notably the restaurant industry. The Association for Corporate Growth, a lobbying group for middle-market businesses, surveyed its members and found 81 percent that tried to get a loan were not able to. 
  • Affiliation rules limit private equity participation in the program.


  • Questions remain about the potential unfavorable accounting and regulatory treatment for the 95 percent participation sold. 
  • At the program’s current rate and fees, bank margins are slim for the retained risk. 

The hearings generated several possible directions forward:

  • Loosen lending restrictions
  • Improve program awareness
  • Ensure sale treatment to ease bank’s regulatory capital requirements
  • Redeploy remaining funds for a new program not under the Federal Reserve’s oversight
  • More attractive loan terms
  • Retain the facility, as is, as a lender of last resort should the economy worsen, especially now that the PPP program has closed as of August 8, 2020 
  • Stricter requirements on retaining employees proposed by a hospitality lobbying group
  • Add an asset-based qualification criteria or facility to allow more access for businesses with good collateral but limited cash flow, i.e., commercial real estate companies

Additional Main Street details can be found at:

BKD COVID-19 Webinar Series: Main Street Lending – What Borrowers Need to Know
New Clarifications on Main Street Business Program, Lender Registration Opened
NFP Main Street Program Now Live


BKD will continue to follow this developing situation. As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. Visit BKD’s COVID-19 Resource Center to learn more. If you have questions, contact your BKD Trusted Advisor™ today.

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