US Fed may add nonprofits to pending Main Street Lending Program

The US Federal Reserve may include nonprofits in its pending Main Street Lending Program for small and mid-sized businesses, Chairman Jerome Powell said, in the wake of a new study showing the “devastating impacts” of the pandemic on these organizations.

“One thing we’re looking at, very strongly looking at, is nonprofits, and is there a way to incorporate them into that facility or a similar facility,” he said at a news conference yesterday. “We will be willing to continue to adapt.”

The $600 billion lending program has undergone a number of changes even before it’s launched to make it more attractive both to prospective lenders and borrowers. The program, announced in March, should be up and running “soon,” Powell said.

— Survey of nonprofits —

He spoke on the heels of a Center for Effective Philanthropy survey of 172 nonprofits that was released this week.

“While Covid-19 has had devastating impacts on nonprofits, the negative impacts have been magnified for nonprofits that provide direct services and serve historically disadvantaged communities,” the study by the Cambridge, Massachusetts-based organization said.

Groups offering direct services in low-income areas can range from food banks to job training centers to family planning services to housing assistance centers.

The survey of a cross-section of nonprofits, not just those providing direct services, found 49 percent in the process of laying off or furloughing employees, or both.

In addition, 62 percent of those surveyed were cutting staff hours, wages or employee benefits, or some combination of the three.

— Main Street Lending Program —

Last week, the Fed expanded the pending loan program to allow both smaller and bigger banks loans.

Powell left open the possibility yesterday that the program could undergo still more changes.

“As we learn more, it could be in terms of size, it could be in terms of lots of different things,” he said. “We have a good product to go to market with now.”

Under the revised terms, loans to small and mid-sized businesses can be between $250,000 and $300 million, compared with what had been a range of $500,000 and $200 million.

Also, repayment of principal doesn’t have to start for two years, compared with what had been just one. And loan terms have been extended from four years to five.

The Main Street facility is positioned to reach businesses larger than those served by the Small Business Administration’s paycheck protection program and smaller than companies that can issue stocks or bonds.