The Federal Reserve’s actions on Thursday to provide up to $2.3 trillion in loans to support the economy give businesses — including auto dealerships — more access to liquidity.
Under the Fed and Treasury Department’s $600 billion Main Street lending program, eligibility is broadened. The program supports small and midsize businesses by offering four-year loans to those with up to 10,000 employees, or up to $2.5 billion in 2019 revenue. Principal and interest payments are deferred for one year, the Fed said.
Main Street loans can be new or can be used to increase existing loans with a lender. Loan amounts start at $1 million. The Fed will purchase 95 percent of Main Street loans, with lenders retaining a 5 percent share.
Additionally, businesses that have received forgivable loans under the Paycheck Protection Program — a crucial part of the $2 trillion Coronavirus Aid, Relief and Economic Security Act and a top option for dealers seeking financial relief — may also take out Main Street loans, the Fed said.
The program’s purpose “is to facilitate loans to fund payroll expenses for businesses that were in good financial standing prior to the COVID crisis,” the National Automobile Dealers Association said in a summary of the program.
“While these loans will not have the extraordinarily favorable terms — such as forgiveness — found in the PPP loan program, the Main Street program will provide another source of liquidity to keep people on the payroll,” the association said.
