Details of Main Street Lending Program

by | Apr 21, 2020

On April 9th, the Federal Reserve took additional actions to provide up to $2.3 trillion in loans to support the economy through the Main Street Lending Program (“MSLP”). The actions the Federal Reserve are taking to support employers of all sizes and communities across the country will ensure credit flows to small and mid-sized businesses.

The Main Street Loan Program will enhance support for small and mid-sized businesses that were in good financial standing before the crisis by offering 4-year loans to eligible borrowers employing up to 10,000 workers or with revenues of less than $2.5 billion. Eligible borrowers must be a business that is created or organized in the US or under the laws of the US with significant operations in, and a majority of its employees based, in the US.

Principal and interest payments will be deferred for one year. Eligible banks may originate (on or after April 8, 2020) new Main Street loans [Main Street New Loan Facility, or MSNLF] or use Main Street loans to increase the size of existing loans (loans originating prior to April 8, 2020) to businesses [Main Street Expanded Loan Facility, or MSELF]. Firms seeking Main Street loans must commit to make reasonable efforts to maintain payroll and retain workers. Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act.

The MSNLF and MSELF are very similar to each other. You can take advantage of either one or the other, even if you have applied and received Paycheck Protection Program loans. The minimum loan amount for both programs is $1 million. The maximum loan is $25 million through the MSNLF, and the maximum loan is $150 million through the MSELF. Of course, there are conditions and calculations to be made that will determine your maximum loan amount. There are no penalties for prepayment.

MSLP loans cannot be used to repay or refinance pre-existing loans.

The loans themselves have a 4-year maturity, and an adjustable rate of Secured Overnight Financing Rate (SOFR) plus 250-400 basis points. There are various required attestations, fees, and collateral requirements associated with these programs.

Click here to view a chart detailing the two programs.

Contact us for additional information or to discuss your specific situation.

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