The Federal Reserve’s emergency lending facility for US small business will stay open for an extra eight days to deal with a late surge in applications ahead of its scheduled closure on December 31.
The Main Street Lending Program will continue processing loans until January 8, the central bank said on Tuesday, extending a deadline for its closure that was finalised — over the Fed’s objection — by Treasury secretary Steven Mnuchin last month.
As of December 23, the programme had funded $14.5bn in loans to small and midsize businesses, the amount having doubled in the past two weeks.
“The door is closing,” Andrew Brenner, head of international fixed income at National Alliance Securities. “Small companies need this money and they need it now. They have to do it before the programme is no longer there.”
The sum disbursed nonetheless represents just a fraction of the total $600bn available in the MSLP, which was created to support small and midsize companies without access to the corporate bond market and that would otherwise have struggled to raise cash to survive the pandemic.
The Fed has touted the low overall uptake of its emergency lending programmes overall as evidence of its success soothing markets with pledges of support alone.
But it tinkered with the terms of the MSLP as late as October 30, suggesting there were issues with the overall design of the programme. Beyond reducing the minimum loan size to $100,000, the Fed also adjusted the associated fees.
Mr Mnuchin defied the wishes of the Fed by refusing to renew the MSLP and a series of other emergency lending facilities beyond their year-end expiration, a decision that was announced on November 19.
“In order to allow more time to process and fund loans that were submitted to the Main Street lender portal on or before December 14 2020, the Federal Reserve Board on Tuesday extended the termination date of the Main Street Lending Program facilities to January 8 2021,” the Fed said in a statement on Tuesday.