Fed Expands Scope of Main Street Lending Program, Here is Your Guide

On April 30th, The Federal Reserve Board on Thursday announced it is expanding the scope and eligibility for the Main Street Lending Program (MSLP), which was designed to help credit flow to small and medium-sized businesses that were in sound financial condition before the COVID-19 outbreak. This latest third option is an expansion on the original Main Street Loan Program earlier this month. (read our summary of the Main Street Loan Program, here).


Key Changes to the Main Street Loan Program:

  • Created a third loan option, the Main Street Priority Loan Facility (MSPLF), that requires increased risk sharing by lenders for borrowers who are more leveraged.
  • Decreased the minimum loan size (for MSNLF and MSPLF) to $500,000.
  • Expanded criteria for small and mid-size businesses who may qualify.

The purpose for the new changes is to open the program up to more participants in as many ways as possible. Minimum loans sizes were reduced and maximum loan sizes were increased. All of the money will be loans and not grants.

Under the new loan option, lenders would retain a 15 percent share on loans that when added to existing debt do not exceed six times a borrower’s income, adjusted for interest payments, taxes, and depreciation and other appropriate adjustments. This compares to the existing loan options where lenders retain a 5 percent share on loans, but have different features.

Below is a summary comparison of the loans, features and details. Contact your Lurie advisor for guidance and questions.

Main Street Lending Program Loan Options

New Loans

(MSNLF)

Priority Loans

(MSPLF)

Expanded Loans

(MSELF)

Term

4 years

4 years

4 years

Minimum Loan Size

$500,000

$500,000

$10,000,000

Maximum Loan Size

The lesser of $25M or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted 2019 EBITDA

The lesser of $25M or an amount that, when added to outstanding and undrawn available debt, does not exceed 6.0x adjusted 2019 EBITDA

The lesser of $200M, 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 EBITDA

Risk Retention

5%

15%

5%

Collateral

Secured or
unsecured
term loan

Secured or
unsecured
term loan

May be secured by existing or new collateral, participating upsize must be secured pro rata

Payment
(year one is deferred for all)

Years 2-4:

33.33% each year

No prepayment penalty

Years 2-4:

15%, 15%, 70%

No prepayment penalty

Years 2-4:

15%, 15%, 70%

No prepayment penalty

Rate

LIBOR + 3%

LIBOR + 3%

LIBOR + 3%

Other Frequently Asked Questions

Businesses (that are not “Ineligible Businesses” discussed below in the next drop down) with up to 15,000 employees or up to $5 billion in 2019 annual revenues.

Must be a business that is created or organized in the United States or under the laws of the United States with significant operations in and a majority of its employees based in the United States. Affiliation rules apply for employee and revenue eligibility testing.

Adopts list of business not normally eligible for SBA loans (but allows non-profits and religious instruction businesses), e.g. financial lending businesses, passive real estate businesses, life insurance, businesses located in a foreign country and various others.

For More Information

Our team will continually update our COVID-19 Information Hub with guidance and resources. In the meantime, please don’t hesitate to reach out to your Lurie advisor with your questions.

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Disclaimer:

This article is for your general education, and does not create a client relationship or any service engagement between you and Lurie LLP. The content of this article is based on the best information available, but official guidance, rules, laws and/or updates may change and become out of date. Please contact your Lurie advisor before acting on any of the information contained in this article.

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