WASHINGTON–The Federal Reserve has announced plans to establish a facility aimed at boosting lending to small businesses via the Small Business Administration’s (SBA) Paycheck Protection Program (PPP).
According to a statement from the Fed, the facility will provide term financing backed by PPP loans. The PPP is a $349-billion program that provides loans through SBA-certified lenders to cover payroll expenses at companies of up to 500 employees. The loans are to be forgiven if the company uses at least 75% of the funds received to cover payroll rather than laying people off during the coronavirus pandemic.
While there have been numerous complaints and glitches related to the PPP, one report indicated the SBA was approving $1-billion-an-hour in the loans on Monday.
The Fed said additional details on the new facility will be released later this week.
The new program from the Fed is just the latest the central bank has announced in recent weeks as it seeks to provide a boost to an economy suffering greatly from the strain of the coronavirus pandemic.
Other Steps Taken
As CUToday.info has previously reported, the Fed, in addition to cutting rates to nearly zero, has also
- Created a money market mutual fund liquidity facility to “enhance the liquidity and functioning of money markets and to support the economy.”
- Created a primary dealer credit facility designed to improve the ability of broker-dealers to access liquidity in the overnight loan market that banks use to meet their reserve requirements.
- Announced a commercial paper funding facility to provide a liquidity backstop to U.S. issuers of commercial paper through a special-purpose vehicle that will purchase unsecured and asset-backed commercial paper directly from eligible companies.
- Created a facility for foreign and international monetary authorities that allows FIMA account holders (central banks and other international monetary authorities with accounts at the Federal Reserve Bank of New York) to enter into repurchase agreements with the Fed.
Fed Chairman Jerome Powell has also announced what he termed “limitless” liquidity that will be provided to the markets.