While PPP loans have all but dried up, there’s another program that’s gotten lost in the shuffle.. leaving billions of federal dollars sitting around untouched.
Announced in early April to help businesses survive the economic crater caused by the Coronavirus, The Main Street Lending Program was supposed to be an alternative to the PPP loan program.
“It’s very diverse, small, medium and large companies. Very different industries, very different credit needs. Some of them asset based, some of them cash flow based. So it’s a really complex undertaking,” said Federal Reserve Chairman Jerome Powell in June.
But that complexity, coupled with the fact they were loans and not grants seemed to scare many businesses from applying for fear they wouldn’t be able to pay it back.. And by early August, just over a dozen loans, NATIONWIDE had been issued totaling 0.1% of the 600 billion set aside for the program.
“While all of this money has been sitting on the sidelines, tens of thousands of businesses have permanently closed and millions of American’s have lost their jobs, by any measure the Main Street program has been a failure,” said Democrat Bharat Ramamurti a Senate Oversight Commission Member
Supporters of the program say it simply took longer to set up the program which wasn’t fully ready until late June. And things have gotten a little better, recent federal data as of August 30th shows the program has issued just 119 loans totaling slightly over a billion dollars.
“Now, America was built with the grit and determination of small businesses all across the country, and that includes the ones that line Main Street in Bismarck, and yet, not a single north Dakota Business has taken advantage of the Main Street Lending Program, and officials KX News talked to say there might be a very specific reason why that is.
KX News went to the North Dakota Commerce Department and sat down with Deputy Commissioner Shawn Kessel, he tells us one reason businesses were put off was the minimum loan was $250,000 among other things.
“It was also designed for businesses that had 15,000 or less employees, well, 75% of businesses in North Dakota have 10 employees or less, and so the applicability of that program to North Dakota, was just remote,” said Kessel.
However, of all the banks across the county that can distribute Main Street Loans, Starion Bank right here in Bismarck approved the very first loan, for 12.3 million dollars to a Madison Wisconsin Dental Clinic.
Don Morgan is the president of Starion and says the Main Street loan is not for everyone and it takes a lot to get it through.
“A lot of underwriting, a lot of specifics, a lot of data gathering and decision making, so a good program, but I’m not surprised it’s taken a while to get off the ground, given the type of program that it is,” said Morgan.
He adds it’s too early to completely tell if the program has been a failure simply because banks are still getting an understanding off all the state and government aid that’s out there.
Financial experts do believe more businesses will take advantage of the program, as the economic slowdown drags on.