The Main Street Lending Program: What You Need to Know

The Program:

The Main Street Lending Program is intended to provide additional credit to help eligible small- and medium-sized companies who were financially healthy before the COVID-19 crisis to maintain payroll and operations. The program is designed to support businesses that were either ineligible to receive PPP funding or require further financial assistance after receiving PPP funds.

Loans originated under the Main Street Lending Program are not forgivable, however, they offer favorable terms to help the immediate cash position of newly struggling businesses. The program is segmented into three loan types, each with unique terms and qualifying loan sizes. Loan sizes range from $250K to $300MM.

The Terms:

Each of the three loan products offers similar terms. See the graphic below with the terms set by the Fed for each loan product.

Source: Federal Reserve Bank of Boston

Additional eligibility requirements and criteria:

● Borrowers must be U.S. founded with >50% domestic workforce.

● Borrowers must have incurred or will incur “covered losses” as a result of the COVID-19 crisis such as reduced demand and unavailability of credit.

● Borrowers may not also participate in one of the other Main Street loan facilities as well as the Primary Market Corporate Credit Facility (PPP loan recipients are eligible).

● Borrowers may not have received specific support pursuant to the CARES Act (i.e.; Subtitle A of the Title IV for air carriers, air cargo, and businesses critical to national security).

● Borrowers must commit to refrain from repaying principal balance or interest on any debt until the Main Street loan is repaid in full, unless the debt or interest payment is mandatory and due.

● Borrowers must commit that they will not seek to cancel or reduce any of its committed lines of credit with the Main Street lender or any other lender.

● Borrowers must certify that there is a reasonable basis to believe that, as of the date of origination of the Main Street loan, they have the ability to meet financial obligations for at least the next 90 days and do not expect to file for bankruptcy in that period.

● Borrowers must commit to the compensation, stock repurchase, and dividend restrictions as outlined in the CARES Act for the duration of the loan term plus 1 year.

Retention of Employees:

● Eligible borrowers that participate in any Main Street Lending Program facility should make commercially reasonable efforts to maintain payroll and retain employees during the time that the term loan is outstanding.

○ Businesses that have already laid-off or furloughed workers as a result of COVID-19 are still eligible to apply for Main Street loans.

Note: There are two additional loan products specifically for non-profit organizations. More information for non-profit applicants can be found here.

How to Apply:

Interested businesses should work with an eligible lender to apply. Borrowers should work with the lender to select and apply to one of the three loan products. The lender submits the application and required documentation for the borrower. While the Main Street Lending Program has defined minimum program requirements, lenders may impose additional underwriting criteria for qualification. More information as well as a list of eligible lenders can be found here.

Of note, the Federal Reserve Board has extended the purchase of loan participations via the Main Street SPV until December 31st, 2020.

More Information on the Program:

The Main Street Lending Program was established with a $75B equity investment provided by the Treasury Department from the CARES Act. The program is administered by the Federal Reserve Bank of Boston which has created a Special Purpose Vehicle to facilitate the purchase of up to $600B in loan participations. The Fed will participate in the program by purchasing a 95% interest in each eligible loan, while the lender retains 5%.

Source: Federal Reserve Bank of Boston

Sources:

The Federal Reserve

The Boston Fed

U.S. Chamber of Commerce

© 2020 The Keystone Group. All Rights Reserved.

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