The Federal Reserve’s pandemic program—the Main Street Lending Program—aimed at supporting midsize businesses has been burying those same businesses in high interest rates and balloon payments, Bloomberg reports.
The Main Street Lending Program was designed to help businesses that were too big to apply for forgivable loans through the Paycheck Protection Program and too small to tap U.S. capital markets.
The program, which marked the Fed’s first effort to systematically support American businesses since the Great Depression, ultimately made 1,830 adjustable rate loans ranging in size from $100,000 to $300 million.
While much of the $17.5 billion in loans has been repaid, another $1.23 billion in interest and principal payments was in default as of Oct. 31. The Federal Reserve expects defaults to grow dramatically as businesses grapple with two upcoming challenges: a massive 70% lump sum payment due next year and a steep interest bill.
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