Fed Lowers Minimum Loan Size for Main Street Lending Program, Better Terms for Small to Mid Sized Businesses
On June 8th, The Federal Reserve Board announced changes to 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 change lowers the minimum loan amount, raises the maximum loan limit, adjusts the principal repayment schedule to begin after two years, and extends the term to five years, providing borrowers with greater flexibility in repaying the loans.
Related:
- May 4 | Fed Expands Scope of Main Street Lending Program, Here is Your Guide
- April 13 | Main Street Business Lending Program – Fed, Treasury Launch $600 Billion Relief Effort for Small to Mid-sized Businesses
Below is a summary comparison and key changes for each 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 | 5 years was 4 years | 5 years was 4 years | 5 years was 4 years |
Minimum Loan Size | $250,000 was $500,000 | $250,000 was $500,000 | $10M unchanged |
Maximum Loan Size | The lesser of $35M* or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted 2019 EBITDA *was $25M | The lesser of $50M* or an amount that, when added to outstanding and undrawn available debt, does not exceed 6.0x adjusted 2019 EBITDA *was $25M | The lesser of $300M,* 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 *was $200M |
Risk Retention | 5% unchanged | 5% was 15% | 5% unchanged |
Collateral | Secured or | Secured or | May be secured by existing or new collateral, participating upsize must be secured pro rata |
Payment Terms (Principal payment for years one and two is deferred for all three options). | Years 3-5: 15%, 15%, 70% was 33.33% / year No prepayment penalty. Interest payments are deferred for one year. | Years 3-5: 15%, 15%, 70% unchanged No prepayment penalty. Interest payments are deferred for one year. | Years 3-5: 15%, 15%, 70% unchanged No prepayment penalty. Interest payments are deferred for one year. |
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.
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