The Federal Reserve is going to establish a facility to facilitate lending to small businesses via the Small Business Administration’s (SBA) Paycheck Protection Program (PPP), the central bank said Monday. The facility will provide term financing backed by PPP loans. “Additional details will be announced this week,” the Fed said.
The SBA PPP program is one of two programs created for the loan guaranty agency under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
The new PPP facility is among several that the Fed has created or announced over the last several weeks in response to the coronavirus crisis. The others include:
- The facility for foreign and international monetary authorities (FIMA, set up March 31), which allows FIMA account holders (central banks and other international monetary authorities with accounts at the Federal Reserve Bank of New York) to enter into repurchase agreements with the Fed. In these transactions, according to the Fed, FIMA account holders temporarily exchange their U.S. Treasury securities held with the Federal Reserve for U.S. dollars, which can then be made available to institutions in their jurisdictions.
- The money market mutual fund liquidity facility (MMLF, March 19), established to “enhance the liquidity and functioning of money markets and to support the economy” in the face of the financial impact of the coronavirus crisis.
- The primary dealer credit facility (PDCF, set up March 17), intended to improve the ability of broker dealers to access liquidity in the overnight loan market that banks use to meet their reserve requirements.
- The commercial paper funding facility (CPFF, March 17), aimed at providing a liquidity backstop to U.S. issuers of commercial paper through a special-purpose vehicle (SPV) that will purchase unsecured and asset-backed commercial paper directly from eligible companies.