UPDATE: July 6, 2020: The Main Street Lending Program is fully operational, the Federal Reserve Bank of Boston announced Monday, "ready to purchase participations in eligible loans that are submitted to the program by registered lenders."

Meanwhile, President Donald Trump on Saturday signed into law the bill extending the loan application deadline for the Paycheck Protection Program until Aug. 8.

UPDATE: July 2, 2020: The House, in a unanimous vote Wednesday, passed a bill to extend the deadline to request PPP loans until Aug. 8. The bill now awaits President Trump's signature. 

Dive Brief:

• The Senate on Tuesday night passed by unanimous consent an extension to keep the Paycheck Protection Program (PPP) running through Aug. 8. 
• The Small Business Administration (SBA) closed the window to accept new applications Tuesday with more than $130 billion in funding left unused, according to The Wall Street Journal. Demand for the program has slowed considerably amid a flurry of rule changes and eligibility adjustments.
• The extension comes as Federal Reserve Chair Jerome Powell told the House Financial Services Committee on Tuesday that another government-backed pandemic relief vehicle, the Main Street Lending Program, has seen relatively little enthusiasm from borrowers.

Dive Insight:

Several lawmakers have pitched ideas to expand small businesses' eligibility for PPP or boost their interest in it. Senate Democrats have proposed a bill to let small businesses take out a second loan through the program if they have 100 or fewer employees and can show they've lost at least half their revenue because of the coronavirus pandemic. To qualify, businesses must have spent their initial loan, or be on pace to. Rep. Angie Craig, D-MN, has proposed a companion bill in the House.

Sen. Marco Rubio, R-FL, is considering a bill to allow chambers of commerce to apply for PPP loans, setting aside $25 billion for businesses with fewer than 10 employees and directing funds to companies that prove they were affected by the pandemic, Bloomberg reported, citing Rubio's office.

Rubio, who has reconvened the bipartisan task force that established the PPP, said he wants the program's next iteration to target "truly small businesses" and provide financing to underserved communities so Black-owned businesses can access funds.

Other measures concern loan forgiveness. Sens. Kevin Cramer, R-ND, and Kyrsten Sinema, D-AZ, have introduced a bill to forgive all loans under $150,000. That would cover 85% of the number of PPP loans initiated but about 26% of the money used in the program.

Sen. Ben Cardin, D-MD, who offered the extension Tuesday night, said June 30 was thought to be a "reasonable" deadline when PPP was created in March. "We thought by the end of June that our economy would be back on track and we would not need to have additional applications after that date," he said, according to Bloomberg.

Despite unanimous consent, at least one senator wanted to put a qualifier on the extension. Sen. Rick Scott, R-FL, wanted to limit future loans to the neediest businesses, but Cardin objected, saying PPP could be modified during the next virus relief package, which Sen. Mitch McConnell, R-KY, said earlier Tuesday would be debated in late July.

Unused PPP funds will be returned to the Treasury Department, unless Congress repurposes it.

Slow start for Main Street

Meanwhile, about 300 banks have registered with the Federal Reserve Bank of Boston to be lenders in the Main Street Lending Program since it launched June 15, Powell told lawmakers.

However, banks are "not getting a ton of interest from borrowers, [though] many say they expect that to change over the course of the next few months," he said. Banks have typically seen fewer than 200 serious expressions of interest each since the program launched, according to the Financial Times.

The $600 billion program has drawn flak over its $250,000 minimum loan, which detractors have said is too high for many smaller businesses. Powell said the Fed has not yet considered reducing the $250,000 minimum, which the central bank has already halved twice.

"We can, once we get up and running, look at lowering it again, but you get into a very different kind of lending when you're down lower, and these are really personal loans rather than business loans," Powell said, according to American Banker.

Bankers, too, have blasted the Main Street program for its intricacy. The administrative burden has deterred some borrowers: It may cost tens of thousands of dollars to tailor documents to each borrower. Additionally, banks making loans to large customers must seek agreement from that company's existing lenders. Banks are also blocked from reducing existing loans for some businesses that benefit from the Main Street program.

"What banks are telling us is that once borrowers have a better sense of the details and the complexity of the program — the legal documentation, the fact that it is a participation structure, the requirement that the borrower has to do quarterly reporting — they may lose interest," Lauren Anderson, a senior vice president and associate general counsel at the Bank Policy Institute, told the Financial Times.

Banks are struggling to find borrowers that are creditworthy enough to qualify for the loans, but not creditworthy enough to get them in the commercial market, Anderson added.

On Capitol Hill on Tuesday, Powell said the Fed would "continue to be open to playing with the formula and making adjustments."

The time frame to tweak the Main Street loan vehicle may be considerably longer than that for PPP.

"The reason why nobody is selling a lot of demand with a high sense of urgency today is because this is a tool to get liquidity for several years," a senior bank executive told the Financial Times. "It's not like PPP where there’s a fear the money is going to run out."