U.S. Senator Kevin Cramer (R-ND), a Senate Banking Committee member, issued the following statement after the Federal Reserve Board announced it is expanding the scope and eligibility of the Main Street Lending Program:
“I am encouraged by my first review of the Main Street Lending Program’s expansion. It is another arrow in the quiver, encompassing a larger pool of borrowers, such as North Dakota’s oil and gas industry. With the decrease in demand and oversupply due to the global oil price war creating a valley for these highly leveraged companies, this expansion will help them bridge the gap as we look to reopen America. I thank Chairman Powell, as well as President Trump and his Administration leaders like Secretary Mnuchin and Secretary Brouillette, for listening to our concerns.”
According to the Federal Reserve, the changes to the Main Street Lending Program include:
- Creating a third loan option, with increased risk sharing by lenders for borrowers with greater leverage;
- Lowering the minimum loan size for certain loans to $500,000; and
- Expanding the pool of businesses eligible to borrow.
Additionally, businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible, compared to the initial program terms, which were for companies with up to 10,000 employees and $2.5 billion in revenue. The term sheet for this program does not contain a credit rating requirement, and the business needs to only be established prior to March 13, 2020.
Senator Cramer led a group of his colleagues last week in writing a letter to the Federal Reserve, as well as the Trump Administration, urging them to make credit facilities accessible to energy producers.
“Our energy producers should not be unfairly excluded from credit due to an arbitrary date and their viability should be protected with enhanced support for their credit and access to capital,” the senators wrote. “Assisting these companies could be the difference between maintaining our domestic energy production and workforce or shedding more U.S. jobs and returning to dependence on foreign sources of oil.”
The reforms they are seeking include:
- Changing the date of the required credit rating to early March, and
- Changing the required number of credit ratings on the term sheets to one, and
- Providing additional flexibility on the credit score requirements.