Court filing
Main Street Lending Program Survey Results (SIGPR-A-22-001)
Record facts
| Court | Special Inspector General for Pandemic Recovery |
|---|---|
| Filed | 2022-01-27 |
Summary
A report by the Office of Audits of the Special Inspector General for Pandemic Recovery, Report Number SIGPR-A-22-001, dated January 27, 2022, presenting the results of a survey of Main Street Lending Program lenders and borrowers. The report states that the survey was sent on August 25, 2021 and drew responses from 58 lenders and 627 borrowers. It reports that 88% of lenders and 96% of borrowers said the program enabled businesses to continue operating, and that 97% of lenders and 94% of borrowers would use a similar program in the future. It identifies three common critiques: program complexity, restrictive eligibility requirements, and borrowers' difficulty finding participating lenders. Appendix A charts lender responses and Appendix B charts borrower responses.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
SIGPR-A-22-001
Office of the Special Inspector General
for Pandemic Recovery
Office of Audits
Main Street Lending Program
Survey Results
Report Number: SIGPR-A-22-001
January 27, 2022
1
Introduction
The Special Inspector General for Pandemic Recovery (SIGPR) was established by
Section 4018 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Under the CARES Act, SIGPR has the duty to conduct, supervise, and coordinate
audits and investigations of the making, purchase, management, and sale of loans, loan
guarantees, and other investments by the Secretary of the Treasury under any program
established by the Secretary under the Coronavirus Economic Stabilization Act of 2020
(CESA), as well as the management by the Secretary of any program established under
CESA. SIGPR also has the duties, responsibilities, powers, and authorities granted
inspectors general under the Inspector General Act of 1978.
The role and mission of SIGPR is to safeguard the people’s tax dollars appropriated by
Congress through the CARES Act. SIGPR strives to ensure that the American taxpayer
gets the best return on investment by efficiently rooting out fraud, waste, and abuse. In
carrying out its mission, SIGPR’s goal is to treat everyone with respect, to operate with
the utmost integrity, and to be fair, objective, and independent.
Background
Section 4003, Division A, Title IV, Subtitle A of the CARES Act authorizes the
Secretary of the Treasury to make loans, loan guarantees, and other investments to
provide liquidity to eligible businesses related to losses incurred as a result of the
coronavirus pandemic. Section 4003(b)(4) authorizes the Secretary “to make loans
and loan guarantees to, and other investments in, programs or facilities established
by the Board of Governors of the Federal Reserve System….” On April 9, 2020, the
Board and Secretary of the Treasury announced the establishment of the Main Street
Lending Program (MSLP) under the authority of Section 13(3) of the Federal
Reserve Act, with approval of the Secretary.1
The Federal Reserve Bank of Boston (FRBB) operates the MSLP. To implement the
program, the FRBB established a Special Purpose Vehicle (SPV) to purchase
participations in loans originated by eligible lenders. The SPV consists of the FRBB as
the Managing Member, and the Department of the Treasury (Treasury) as the Preferred
Equity Member, as Treasury originally made a $37.5 billion equity investment in the
SPV using funds appropriated by the CARES Act.2 Banks that participated in the MSLP
1 Specifically, Treasury announced that “Pursuant to section 13(3) of the Federal Reserve Act,” the
Secretary, “approved the establishment” of the program. See “Treasury and Federal Reserve Board
Announce New and Expanded Lending Programs to Provide up to $2.3 Trillion in Financing” (found at
Treasury Press Release 04_09_2020). The Federal Reserve Board announced that it had established the
program “under the authority of Section 13(3) of the Federal Reserve Act, with approval of the Treasury
Secretary.” See “Federal Reserve takes additional actions to provide up to $2.3 trillion in loans to support
the economy” (found at Federal Reserve Press Release 04_09_2020).
2 Treasury made an initial equity investment of $37.5 billion in the SPV on May 29, 2020. On November
19, 2020, the Treasury Secretary requested the return of Treasury’s excess capital in the SPV, and on
January 11, 2021, the Federal Reserve Bank of Boston caused the SPV to return the unused funds in the
amount of $20.9 billion, resulting in an equity investment of $16.6 billion.
2
and issued loans under the program retained a 5 percent stake in the loans, while the
SPV purchased 95 percent.
All MSLP loans have a five-year maturity, with principal payments deferred for the first
two years. Interest payments are also deferred for one year, and borrowers can prepay
loans without penalty. All MSLP loans are also full recourse loans and are not
forgivable. Maximum loan amounts differ depending on the type of loan, going as high
as $300 million. This maximum loan amount will also depend on a borrower’s debt to
earnings ratio.
To be eligible to borrow under the MSLP, a business must satisfy certain eligibility
criteria, including restrictions of the CARES Act incorporated into the program’s design.
For example, an eligible business, must not:
• Borrow an amount that will result in a debt to earnings ratio in excess of program
guidelines;
• Have total revenues for the year 2019 of greater than $5 billion, or have greater
than 15,000 employees;
• Have been established on or after March 13, 2020;
• Be an ineligible business as listed in 13 CFR 120.110(b)-(j), (m)-(s);
• Hold less than 50 percent of its assets in the United States;
• Generate less than 50 percent of its net income, operating revenues, and
operating expenses in the United States; and
• Have also received support from the “Direct Loan Program” (Section 4003(b)(1)-
(3) of the CARES Act).
In addition to these requirements, MSLP lenders were expected to assess each
potential borrower’s pre-pandemic financial condition and post-pandemic prospects,
using its own application documentation and underwriting processes.
From the time of the first MSLP loan in July 2020 until the program’s conclusion in
January 2021, 312 participating banks awarded 1830 loans worth over $17.5 billion.
Purpose
SIGPR is currently examining Treasury’s investment in the Main Street Lending
Program. As part of our examination, we surveyed both MSLP lender banks and
borrowers to gain an understanding of how they viewed the program. The purpose of
this report is to provide the results of SIGPR’s survey of MSLP lenders and borrowers.
Methodology
SIGPR sent a survey to all MSLP lenders and borrowers on August 25, 2021. They had
until October 15, 2021 to complete the survey. SIGPR received responses from 58
lenders and 627 borrowers. The SIGPR survey team reviewed and categorized
responses to the survey’s short answer questions to create quantifiable response
3
summaries.
This report represents the results of our survey of MSLP lenders and borrowers, which
was conducted as part of our audit of the MSLP. In accordance with generally accepted
government auditing standards (GAGAS), during an audit, the auditors may provide
interim reports of significant matters to appropriate entity and oversight officials. The
related ongoing audit, when completed, will comply with GAGAS. The associated
performance audit report that will be issued in the future will incorporate the survey
results discussed in this report.
Results
Feedback on the MSLP was mostly positive from both lenders and borrowers.
Both lenders and borrowers responded that the program enabled businesses to
continue operating during the pandemic, and that the program met their expectations.
The majority of lenders and borrowers felt the loan application process was “acceptable”
or better. Finally, nearly all lenders and borrowers surveyed responded that they would
be willing to participate in a similar program in the future. Details on these responses
are shown below.
Was the MSLP successful in enabling businesses to continue operating during
the pandemic?
Yes
No
Lenders
88%
12%
Borrowers
96%
4%
Did the MSLP loan process meet your expectations?
Yes
No
Lenders
79%
21%
Borrowers
94%
6%
Would you use MSLP or a similar government program in the future?
Yes
No
Lenders
97%
3%
Borrowers
94%
6%
4
Please provide your assessment of the MSLP application process.
Extremely
easy
Somewhat
user friendly
Acceptable
Harder than
expected
Extremely
difficult
Lenders
9%
26%
34%
29%
2%
Borrowers
23%
29%
29%
12%
6%
As for the borrowers themselves, almost all responding borrowers answered that the
program enabled them to maintain payroll and retain employees.
Since receiving the MSLP loan, was your business able to make reasonable
efforts to maintain payroll and employees?
Yes
No
Borrowers
99%
1%
Although most lenders and borrowers we surveyed indicated positive experiences with
the program, we noted some common responses where lenders and borrowers thought
the program could have been improved. Three of the most common critiques we
received had to do with the complexity of the program, restrictive eligibility
requirements, and borrowers’ difficulty in finding participating lenders.
Program Complexity
As noted above, when asked to provide an assessment of the MSLP application
process, most lenders and borrowers provided a rating of “acceptable” or better.
However, 31 percent of lenders and 18 percent of borrowers rated the process “harder
than expected”, or “extremely difficult”. When given an opportunity to explain their
response, program complexity was the most common critique given.
The SIGPR survey team singled out comments across survey questions related to
program complexity and found that the most common issue contributing to program
complexity for borrowers was unclear guidance. Twenty-three percent of borrower
comments that mentioned program complexity as an issue identified unclear guidance
as a cause. Under the program complexity analysis, borrowers also cited a lengthy
underwriting process, lender banks’ uncertainty with the program, and ongoing program
term changes as the other most common issues. Examples of borrower comments on
this issue include, “the process was extremely difficult and the rules (or interpretation by
the bank) constantly changed”, and “everyone was doing the best that they could, but
rules were constantly being updated and information available to the bank and to the
borrower was not always timely or consistent.” Issues with program complexity could be
further evident by our survey finding that 32 percent of responding borrowers needed
assistance from a third party to apply for an MSLP loan.
Like borrowers, lenders also highlighted unclear guidance as an issue. Of 39 lenders
who provided a written explanation of their assessment of the application process, 12
5
(31 percent) described the process as complex. Furthermore, in response to a question
about the aspect of the program that was least attractive, the most common response
was program complexity (39 percent of responses). One lender stated, “the ongoing
FAQs, vague definitions and long forms need[ed] multiple rounds of review from both
the business and legal teams to try to ensure a correct response is provided.”
Another common response from lenders pertaining to program complexity involved the
automated application process. Nearly 10 percent of responses commenting on
program complexity pointed to systems issues as a factor. Lenders seem to agree that
they were required to resubmit information every time they made a change during the
application process. One lender stated that, “the most challenging aspect of the
application process was that our documentation packet was not reviewed in its entirety
upon being sent. Instead, one mistake was found which caused the approval to be
rejected. We would correct that mistake, resend the packet until the next error was
found. This continued until we perfected the documentation process.” Similarly, another
stated, “[my] only rationale for not designating this as extremely easy was that the final
submission process required I re-upload all documents each and every time an edit or
change was required. It would have been extremely easy if I only had to re-upload
changed documents….”
Restrictive Eligibility Requirements
In short answer responses on how the program could be improved, survey respondents
provided feedback that the program had too many eligibility restrictions for potential
borrowers. Of the 363 borrowers who provided a recommendation on how to improve
the program, 61 (17 percent) mentioned less restrictive qualifying requirements. This is
a significant figure considering that the respondents were all able to qualify for a loan.
Lenders shared the concern about restrictive eligibility requirements for borrowers.
Lenders mentioned a limited universe of eligible borrowers in response to several
survey questions. Lenders commented that, “it was difficult to find customers who
qualified for the program and/or found the loan attractive”, and “this program didn’t
make much sense because the only borrowers who would qualify didn’t need the
money, and the only borrowers who needed the money wouldn’t qualify.”
Difficulty in Finding MSLP Lender
Borrowers often cited difficulty in finding an MSLP lender as an issue with the program.
The Federal Reserve Bank of Boston reported that there were 643 banks that registered
to become MSLP lenders, which only represents approximately 12 percent of banks that
could have registered with the program. Just less than half of the registered banks
ended up issuing a loan.
Our survey found that nearly 40 percent of MSLP borrowers got a loan from a bank that
was not the borrower’s primary banking institution. In response to a survey question
about recommended improvements to the program, 48 of the 363 borrowers (13
6
percent) who offered a recommendation requested an increase in available lenders.
One borrower responded, “…my experience when shopping for MSLP lenders was that
many (maybe most) banks were wary of participation in the program. Figuring out why
they were hesitant and fixing that so there are more participating banks may improve
uptake of a program like this overall.”
Even among banks registered with MSLP, our survey indicated that borrowers had
issues finding banks willing to provide loans. Our survey asked borrowers about the
number of applications they submitted before being approved for an MSLP loan. Among
the 66 borrowers that submitted more than one application, 16 (24 percent) indicated
they applied more than once because the bank they applied to initially did not want to
use the program.
Banks that issued MSLP loans even acknowledged the difficulty borrowers encountered
in finding available MSLP lenders. When asked why borrowers may have chosen their
bank as their MSLP lender, 11 of 58 lenders (19 percent) answered that they were one
of the few banks offering the program.
Survey Result Details
Lender responses are provided in detail in Appendix A. Borrower responses are
provided in detail in Appendix B.
Survey Team
This survey was managed and conducted by the individuals listed below:
Kevin Gallagher
Audit Manager
Emily Brown
Auditor-In-Charge
A-1
Appendix A – Responses from MSLP Lenders
The charts in Appendix A summarize MSLP lenders’ answers to selected questions in
SIGPR’s Main Street Lending Program Lender Survey sent August 25, 2021. SIGPR
received 58 lender responses. The number of responses is denoted by n. Please note
that chart totals may not add up to 58 because (1) respondents provided more than one
relevant answer in their response, (2) respondents provided a response that the survey
team did not consider responsive to the question, or (3) some respondents did not
answer all the questions.
1. From your perspective
as a financial
institution, please
provide your
assessment of the
application process for
the Federal Reserve's
Main Street Lending
Program (MSLP).
n = 58
2. When deciding whether
to participate in the
MSLP, which aspect(s)
of the program
was/were most
attractive to your
institution?
n = 58
9%
26%
34%
29%
2%
Extremely easy and user friendly
Somewhat user friendly
Acceptable
Harder than expected
Extremely difficult and cumbersome
12
30
5
8
5
6
4
6
4
0
5
10
15
20
25
30
35
Favorable Terms/Repayment
Relief Loans for Customers
Loan Would Not Have Been Possible…
95% Participation
Loan Fees
Low Risk
Add New Customers Through Program
Other
Help Clients Restructure/Refinance Debt
A-2
3. When deciding whether
to participate in the
MSLP, which aspect(s)
of the program
was/were least
attractive to your
institution?
n = 57
4. Why do you believe the
MSLP recipients
selected your institution
as their MSLP lender?
n = 58
22
8
3
3
5
2
3
12
4
0
5
10
15
20
25
Program Complexity
Administrative Burden
Limitations on Other Debt
Program Restrictions
Universe of Borrowers Small
Communication Issues
Uncertainty of Process
Other
Extra Legal Review
46
11
4
2
3
0
5
10
15
20
25
30
35
40
45
50
Existing
Relationship
with Clients
One of the
few banks
offering the
program
Referral
MSLP
Promotion
Other
A-3
5. Why did your institution
decide to loan money
to certain applicants
through the MSLP,
rather than making your
standard business
loans to those
applicants?
n = 58
6. How did your
institution's MSLP loan
application evaluation
process differ from your
standard business
loans? For example,
were there differences
in the level of review
and/or amount of
supporting
documentation
required? Please
explain any differences.
n = 58
25
3
10
11
7
6
4
5
0
5
10
15
20
25
30
7
35
8
5
3
2
2
3
More legal Involvement
No Change
Increased Review
Committee Approval
More Reliance on Historical Data
Focus on Rebound After MSLP Loan
Additional Information Required
Other
A-4
7. What do you believe
were the benefits of the
MSLP to the loan
recipients?
n = 58
8. In your opinion, was
your MSLP loan
program successful in
enabling businesses to
continue operating
during the COVID-19
pandemic? Please
explain your response.
n = 58
9. Please explain your
response to question 8.
n = 45
39
6
15
4
4
0
10
20
30
40
50
Favorable Repayment/Terms
Lifeline to Business
Improved Cash Flow
Obtain Funding they couldn’t
otherwise
Other
88%
12%
Yes
No
POSITIVE RESPONSES
39
Favorable Repayment/Terms
9
Improved Cashflow/Liquidity
15
Lifeline to Business
15
NEGATIVE RESPONSES
12
Length of Process to Operationalize
1
Continual Changes
1
Too Many Restrictions
1
Lack of Lender Participation
1
Overly Complicated
1
Difficult Process
1
Limited Pool of Borrowers
5
Too Late/Constrictive
1
A-5
10. Did the MSLP process
meet your
expectations?
n = 58
11. Please explain your
response to question
10.
n = 23
79%
21%
Yes
No
4
8
2
6
3
0
2
4
6
8
1
Wish Program Was
Extended/Expanded
Complex Process
Harder Than Expected
Good Program Support
Universe of Borrowers Small
A-6
12. If the federal
government were to
offer another round of
MSLP loans, what
improvement(s) would
you recommend to the
program?
n = 28
13. Would your institution
use MSLP or a similar
government program in
the future?
n = 58
97%
3%
Yes
No
12
8
5
5
5
0
2
4
6
8
10
12
14
Streamline/Simplify Process
Remove Requirement to Input
Data Already in Loan Documents
Reevaluate Repayment Terms
Fix Confusing Documents
Other
B-1
Appendix B – Responses from MSLP Borrowers
The charts in Appendix B summarize respondents’ answers to selected questions in
SIGPR’s Main Street Lending Program Recipient Survey sent August 25, 2021. SIGPR
received 627 borrower responses. The number of responses is denoted by n. Please
note that chart totals may not add up to 627 because (1) respondents provided more
than one relevant answer in their response, (2) respondents provided a response that
the survey team did not consider responsive to the question, or (3) some respondents
did not answer all the questions.
1. From your perspective
as a loan recipient,
please provide your
assessment of the Main
Street Lending
Program application
process.
n = 627
2. Was your MSLP lender
your primary banking
institution?
n = 627
23%
29%
29%
13%
6%
Extremely easy and user friendly
Somewhat user friendly
Acceptable
Harder than expected
Extremely difficult and cumbersome
61%
39%
Yes
No
B-2
3. Why did you select the
MSLP lender your
business used?
n = 231
4. How many times did
you apply for an MSLP
loan before your
application was
accepted?
n = 627
21%
8%
28%
32%
11%
Had an Existing Relationship
Could Not Get Approval From Other Banks
Knowledgeable About the Program
Primary Bank Did Not Offer MSLP
Referral
561
35
12
4
15
0
100
200
300
400
500
600
1
2
3
4
5+
B-3
5. What obstacles
prevented your
application from being
accepted the first time?
n = 66
6. When your business
applied for an MSLP
loan, did your business
meet any of the
following classifications?
n = 748
7%
24%
9%
32%
5%
4%
19%
Bank Did Not Want to Lend to Business Type
Bank Did Not Want to Use MSLP
Do Not Know
Missing Supporting Docs
Bank Required Minimum Balance
Bank Wanted Existing Customers
Bank Determined Borrower Did Not Meet
424
68
36
3
7
24
5
181
0
50
100
150
200
250
300
350
400
450
B-4
7. Did you need assistance
or help from a third party
to apply for and obtain
the MSLP loan?
n = 627
8. What were the benefits
of the MSLP loan to
you?
n = 626
9. In your opinion, did the
MSLP loan enable your
business to continue
operating during the
COVID-19 pandemic?
n = 627
32%
68%
Yes
No
6
44
279
18
148
53
68
Allowed Business to Keep
Investments
Kept Workers Employed
Stayed in Business
Only Potential Source of Credit
Deferred Payback/Low Interest Rate
Helped Liquidity
Allowed Business to Expand
Helped With Other Debt
0
50
100
150
200
250
300
96%
4%
Yes
No
B-5
10. Please explain your
response to question 9.
n = 519
11. Since you received the
MSLP loan, was your
business able to make
commercially
reasonable efforts to
maintain payroll and
retain employees?
n = 627
12. Please explain your
response to question 11.
n = 450
6
78
322
29
45
0
50
100
150
200
250
300
350
Program was
Only Access
to Credit
Enable
Business to
Keep
Employees
Access to
Capital When
Business
Slowed
Could Pay Off
Other Loans
Would Have
Gone Out of
Business
Without It
99%
1%
Yes
No
67
241
83
11
0
50
100
150
200
250
300
Business was Able
to Grow
Business was Able
to Retain All Staff
Business was Able
to Retain Most
Staff
Yes, When
Combined with
Other Loans
B-6
13. Did the MSLP loan
process meet your
expectations?
n = 627
14. If the federal
government were to
offer another round of
MSLP loans, what
improvement(s) would
you recommend to the
program?
n = 625
94%
6%
Yes
No
44%
14%
2%
0%
8%
4%
2%
16%
10%
None
Longer Repayment Terms
Lower Fees
Don't Want Another Government Program
More Lender Banks Involved in Program
Less Restrictions on Loan Proceeds
Simplify Closing Process
Clearer Guidance for Banks
Less Restrictive Qualifying Requirements
B-7
15. Would your business
use MSLP or a similar
government program in
the future?
n = 627
16. Please explain your
response to question 15.
n = 390
94%
6%
Yes
No
49%
32%
3%3% 5%
8%
Yes at current terms
Yes if it was necessary
Yes if terms improve
No not needed at this time
No not at current terms
MaybeFile and source
- File
- REPORT_SIGPR_main-street-lending-program-survey-results_2022-01-27.pdf
- Size
- 1,398,882 bytes
- SHA-256
- 8a9f20357cdc5884ffcdad2dabff158794fa17b3ce154a08a8708da9bda5a46b
- Original
- www.oversight.gov