The Federal Reserve’s emergency loan facility for U.S. small businesses will remain open for an additional eight days to deal with a delay push in applications before it closes on December 31.
The Main Street loan program will continue to process loans until January 8, the central bank said on Tuesday, extending the deadline for its closure which was finalized – despite the Fed’s objection – by the Treasury Secretary Steven Mnuchin last month.
As of Dec. 23, the program had funded $ 14.5 billion in loans to small and medium-sized 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 businesses need this money and they need it now. They have to do it before the program is gone. “
The amount disbursed, however, is only a fraction of the total of $ 600 billion available in the MSLP, which was created to support small and medium-sized businesses without access to the corporate bond market and who would otherwise have struggled to raise cash to survive the pandemic.
The Fed has touted the low overall utilization of its emergency lending programs as a whole as proof of its success in appeasing markets with pledges of support only.
But he cobbled together the terms of the MSLP until October 30, suggesting there were issues with the overall design of the program. Beyond reducing the minimum loan size to $ 100,000, the Fed has also adjusted the associated fees.
Mr. Mnuchin defied 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 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 extended the termination date of the loan program facilities on Tuesday. Main Street as of January 8, 2021, ”the Fed said in a statement Tuesday.