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Fed tweaks rules for COVID-19 loans aimed at small businesses

Fed tweaks rules for COVID-19 loans aimed at small businesses
A woman walks her dog past a boarded up wedding chapel in downtown Los Angeles on August 10. The Fed on Friday loosened restrictions on COVID-19 relief loans for small businesses. File photo by Jim Ruymen/UPI | License Photo

Oct. 30 (UPI) -- The Federal Reserve Board announced Friday it has tweaked the rules for its little-used Main Street Lending Program in a bid to boost participation in the $600 billion coronavirus relief program.

The lending effort, targeted to small- and medium-sized businesses and nonprofit groups needing help to survive the COVID-19 pandemic, is backed by $75 billion in equity provided by the Treasury Department from the CARES Act.

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So far, however, only 400 loans worth a total of $3.7 billion have been issued from the facility.

Some potential borrowers have complained that, unlike the Treasury Department's Paycheck Protection Program, loans under the Main Street programs are not mostly forgivable. Other businesses have cited high fees as disincentive.

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Responding to the concerns, the Fed announced the minimum loan size for three of the Main Street loan facilities has been reduced from $250,000 to $100,000 and their fees "adjusted" to "encourage the provision of these smaller loans."

It also issued new guidance clarifying that borrowers do not need to include PPP loans in calculating their debt load, up to $2 million.

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Loan documents reflecting the new terms are expected to be available to registered lenders within the next week, the central bank said.

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The move came as U.S. businesses were awaiting a long-delayed additional round of pandemic stimulus spending.

The House passed a new round of aid months ago but weeks of negotiations between Democratic lawmakers and White House officials has failed to produce an agreement before next week's general election.

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