The Federal Reserve Increases Loan Access for Small Businesses

With an extensive background in venture capital and equity investments, David Colin Burke leads Selby Lane LLC as the chairman and CEO. Knowledgeable about international capital markets, David Colin Burke follows economic trends closely. In late 2020, the U.S. Federal Reserve (Fed) widened the borrower pool for a support program for businesses and nonprofits that are financially affected by the COVID-19 pandemic.

Crain’s New York Business reported in November 2020 that the Fed took a step to assist small businesses by reducing its Main Street Lending Program’s minimum loan size from $250,000 to $100,000. This action increased loan access for small businesses that are trying to remain afloat amid the pandemic. As of early November, only $3.7 billion of a potential $600 billion had been dispersed since the program started in July. In addition, the Fed altered the fee structure in ways that incentivized banks to make loans of under $250,000.

The Fed traditionally has an array of tools at its disposal for exerting impact on markets, such as obtaining more mortgage-backed and Treasury securities and entering into extended purchase commitments designed to decrease long-term interest rates. It can also pledge to maintain lower short-term rates to target such issues as unemployment and inflation. Additionally, a ceiling can be set on long-term interest rates through yield-curve control.