Authored by: Sean F. Reid
On April 9, 2020, the Treasury Department and the Federal Reserve announced the Main Street Lending Program (“Program”) to expand upon emergency loans otherwise provided by the CARES Act and to provide additional funding opportunities for small to mid-size businesses. On April 30, 2020, after receiving more than 2,200 letters from individuals, businesses, and nonprofits, the Federal Reserve decided to expand the loan options available to businesses and increase the maximum size of businesses that are eligible for support under the Program. The Program was modified to include the following:
- A new third loan option known as the “Priority Loan” with greater risk retention for borrowers with greater leverage;
- Reduction of the minimum loan size for certain loans to $500,000; and
- Expansion of the pool of businesses eligible to borrow.
The chart below summarizes the updated key terms of the three available options under the Program. The Federal Reserve is currently evaluating options to meet the unique needs of nonprofit organizations.
|Main Street Lending Program Options||Main Street New Loans||Main Street Priority Loans||Main Street Expanded Loans|
|Who can borrow?||Businesses with up to 15,000 employees and $2.5 billion in revenue.1||Same||Same|
|Minimum loan size||$500,0002||$500,0002||$10,000,000|
|Maximum loan size||The lesser of $25 million or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted 2019 earnings before interest, tax, depreciation and amortization (EBITDA)||The lesser of $25 million or an amount that, when added to outstanding and undrawn available debt, does not exceed 6.0x adjusted 2019 EBITDA||The lesser of $200 million, 35% of existing outstanding and undrawn available debt, or an amount that, when added to outstanding and undrawn available debt, does not exceed 6.0x adjusted 2019 EBITDA3|
|Payment (year one deferred for all)||Years 2-4: 33.33% each year||Years 2-4: 15%, 15%, 70%||Years 2-4: 15%, 15%, 70%|
|Rate||LIBOR + 3%||LIBOR + 3%||LIBOR + 3%|
What can you do now if interested in obtaining funding through the Program?
The Program is not yet operational. Interested borrowers should contact eligible lenders for more information on whether the lender plans to participate in the Program and for more information on the application process. Eligible lenders are U.S. federally-insured depository institutions (including banks, savings associations, and credit unions) as well as any U.S. branch or affiliate of a foreign bank. Nonbank financial institutions are not considered eligible lenders at this time; however, the Federal Reserve is considering expanding the pool of eligible lenders.
Where can you find additional information regarding the Program?
The Federal Reserve has published updated term sheets for the New Loan Facility and Expanded Loan Facility as well as a term sheet for the Priority Loan Facility. Please refer to the links below:
1The number of employees was originally capped at 10,000.
2The minimum loan amount was originally $1,000,000.
3The maximum loan size for the Expanded Loan was originally the lesser of: (a) $150 million (b) 30% of the borrower’s existing outstanding and committed but undrawn bank debt; or (c) an amount that, when added to the borrower’s existing outstanding and committed but undrawn debt does not exceed the borrower’s 2019 EBITDA.