With Fed Lending Change, More Retailers Can Access Loans

A number of well-known retailers and restaurant chains are newly eligible for loans under the Federal Reserve’s Main Street Lending Program, according to an analysis conducted by S&P Global Market Intelligence.

The Federal Reserve Board on April 30 expanded the scope and eligibility of the lending program, which is intended to help credit flow to small and medium-sized businesses that were in solid financial condition prior to the start of the coronavirus pandemic. While loans were initially limited to businesses with up to 10,000 employees and $2.5 billion in revenue, the criteria has been expanded to allow businesses with up to 15,000 employees or up to $5 billion in revenue to apply.

That has opened the door to retailers like American Eagle Outfitters, Rent-A-Center and Urban Outfitters, and restaurant chains like Cracker Barrel and Texas Roadhouse.

The Fed also added a new loan option, which increases risk sharing by lenders for borrowers with greater leverage, and reduced the minimum loan size for two of the three options available under the program from $1 million to $500,000.

“These changes should help the program meet the needs of a wider range of employers that may need bridge financing to support their operations and the economic recovery,” Federal Reserve chairman Jerome Powell said in remarks prepared in advance of testimony before the US Senate Committee on Banking, Housing and Urban Affairs on Tuesday. Powell added that further adjustments remained a possibility.

The start date for the Main Street program has yet to be officially announced, but Powell added that it would be up and running by the end of May or the beginning of June.

Other retailers newly eligible for loans include jeweler Tiffany & Co., RH (formerly known as Restoration Hardware), The Children’s Place and Five Below.

While most attention on lending during the coronavirus crisis has focused on the US Small Business Administration’s $669 billion Paycheck Protection Program, the Fed’s Main Street Lending Program differs because of its lack of loan forgiveness. While PPP loanholders that meet conditions like keeping workers on the payroll do not have to return funds, Main Street borrowers simply benefit from low interest rates.

Middle market businesses have reported that access to capital has become more difficult, with 33% sharing that borrowing conditions have tightened, according to data collected in the RSM US Middle Market Business Index. RSM and research partner the US Chamber of Commerce said this figure potentially reflected the delayed launch of the Main Street Lending Program, as well as challenges in accessing PPP loans.