Fed Preparing to Finance New Small- Business Payroll Loans

The Federal Reserve said Monday that it will support banks in the effort to lend money to small businesses during the coronavirus pandemic. 

“To facilitate lending to small businesses via the Small Business Administration’s Paycheck Protection Program (PPP), the Federal Reserve will establish a facility to provide term financing backed by PPP loans,” the Federal Reserve’s board of governors said in a statement. “Additional details will be announced this week.”

Those details have not yet emerged, but The New York Times suggests that the Fed could either lend directly to banks participating in the Paycheck Protection Program or buy the loans so banks won’t carry them on their balance sheets. 

Big banks are currently still figuring out how to operate with limitations created by the program’s structure and have reportedly been delayed in distributing money.