Explainer: How Fed's Main Street program compares to other small business pandemic aid

(Reuters) - The Federal Reserve on Monday launched its latest life raft for U.S. businesses hurt by the coronavirus pandemic.

FILE PHOTO: The U.S. Federal Reserve building is set against a blue sky amid the coronavirus pandemic in Washington, U.S., May 1, 2020. REUTERS/Kevin Lamarque

Administered by the Boston Fed, the Main Street Lending Program will offer up to $600 billion in loans through participating lenders to small and medium-sized businesses that were in strong financial shape before the crisis.

Here is an overview of the program and how it varies from other aid available for small businesses:

How do Main Street loans compare to the Paycheck Protection Program?

The biggest difference between the Main Street Lending Program and the Paycheck Protection Program is that Main Street loans cannot be forgiven.

PPP loans can be converted to grants if businesses meet certain requirements, but Main Street loans must be repaid.

Which businesses are eligible for Main Street loans?

The Main Street program is open to U.S. businesses with up to 15,000 employees or with revenues up to $5 billion. PPP loans are only available to businesses with fewer than 500 employees.

Can businesses apply that have received help from other programs?

Businesses that receive PPP loans or economic injury disaster loans can still apply for funding through the Main Street program. However, companies that participate in the Fed’s primary market corporate credit facility, which will purchase debt directly from issuers, cannot receive Main Street loans.

Where can businesses apply for Main Street loans?

Borrowers can apply for Main Street loans from lenders participating in the program, including banks and credit unions.

The Fed will then purchase 95% of the loan. Banks can set their own underwriting standards and may set additional requirements beyond those set by the Fed.

How much can businesses borrow?

Main Street loans can range from $250,000 to $300 million.

How quickly do loans have to be repaid?

Main Street loans have terms of five years, and no payments on principal or interest will be due during the first two years. There is also no penalty for businesses that pay their loans off early.

Visit the Boston Fed's website for more information about the Main Street Lending Program here here.

Reporting by Jonnelle Marte; Editing by Paul Simao