NOTE: As the government continues to update these programs, we will update this section of the user’s guide. Please check back here regularly.
- In an effort to aid entities that might not otherwise be able to secure lending, the law tasks the Treasury Department with providing liquidity to eligible businesses, states and municipalities by providing loans, loan guarantees and other investments.
- The Treasury Department has broad discretion to issue loans to businesses of any size and has at least $454 billion to use for these purposes.
- If you take out such a loan, you must:
- not use it to buy back stocks, unless contractually obligated, until 12 months after the direct loan is no longer outstanding,
- freeze executive compensation and termination packages,
- maintain employment levels at current or pre-COVID-19 levels to the “extent practicable” and
- repay the loan in five years or less.
Main Street Lending Program
- The Main Street New Loan Facility (MSNLF), Main Street Priority Loan Facility (MSPLF) and Main Street Expanded Loan Facility (MSELF) have been created to facilitate lending to U.S. small and medium-sized businesses. These loans are designed for businesses that were unable to access the Paycheck Protection Program (PPP) or that require additional financial support after receiving a PPP loan.
- Note that these loans are not forgivable but are intended to help companies that were in sound financial condition prior to the onset of the COVID-19 pandemic obtain credit to maintain their operations and payroll until conditions normalize.
- These new Facilities share many traits, listed here. Where they differ, those elements are broken down further below.
- For all Main Street Loan Facilities, eligible borrowers must:
- Have up to 15,000 employees (including all full-time, part-time and seasonal employees or persons otherwise employed by the business and its affiliates, and excluding volunteers and independent contractors) or $5 billion in 2019 revenue;
- Be established in the U.S. prior to March 13, 2020, with significant operations and a majority of its employees based in the U.S.; and
- Participate in only one of the Main Street Loan Facilities and not have received specific support pursuant to the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act).
- Loans under these Facilities must have the following features:
- Four-year maturity;
- Principal and interest payments deferred for one year (unpaid interest will be capitalized);
- Adjustable rate of London Interbank Offered Rate (LIBOR) (one or three month) plus 300 basis points; and
- Prepayment permitted without penalty.
- Loans must be taken out by September 30, 2020, unless the government extends this program.
- Main Street loans may be new loans or used to increase the size of existing loans.
- Borrowers that have taken advantage of the PPP (see “Small Business Administration (SBA) Loan Program” section of this page) may also take out Main Street loans. However, borrowers may not have received specific support pursuant to the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act).
- Nonprofit organizations are not currently eligible for Main Street Lending Facilities, but the Federal Reserve and Treasury Department may change this over time.
- While earnings before interest, taxes, depreciation and amortization (EBITDA) currently serves as the key underwriting metric for the Main Street Lending Facilities, the Federal Reserve and Treasury Department recognize that this is not generally the standard for credit risk and will be evaluating the feasibility of adjusting the loan ability metrics.
- Any eligible business shall make a good-faith certification that:
- It requires financing due to the exigent circumstances presented by the COVID-19 pandemic;
- It will make commercially reasonable efforts to maintain its payroll and retain its employees during the term of the loan; and
- It has a reasonable basis to believe that if it receives this loan, it has the ability to meet its financial obligations for at least the next 90 days and does not expect to file for bankruptcy during that time period.
- Additionally, borrowers must:
- Not use the loan to buy back stocks, unless contractually obligated, until 12 months after the direct loan is no longer outstanding;
- Freeze executive compensation and termination packages.
- The Federal Reserve is currently working to create the infrastructure necessary to operationalize the Main Street Lending Program (Program). More information will be posted here as it becomes available. Once the Program is operational, small and medium-sized businesses interested in the Program should seek to apply for Program loans from an eligible lender.
- For further information, see this press release from the Federal Reserve and this Main Street Lending Facility FAQ document.
The Main Street New Loan Facility (MSNLF)
- Program for new loans.
- Minimum loan size is $500,000.
- Maximum loan size is the lesser of:
- $25 million or
- An amount that, when added to the eligible borrower's existing outstanding and committed but undrawn debt, does not exceed four times the eligible borrower’s adjusted 2019 EBITDA.
- Principal amortization is one-third at the end of the second year, one-third at the end of the third year and one-third at maturity at the end of the fourth year.
- The loans must not be, at the time of origination or at any time during the term of the Eligible Loan, contractually subordinated in terms of priority to any of the Eligible Borrower’s other loans or debt instruments.
- Eligible Lenders will pay the Main Street special purpose vehicle (SPV) a transaction fee of 100 basis points of the principal amount of the MSNLF or MSPLF Loan at the time of origination, and may pass on this fee to Eligible Borrowers. In addition, the Eligible Borrower will pay the Eligible Lender a fee of up to 100 basis points of the principal amount of the MSNLF or MSPLF Loan at the time of origination. Eligible Lenders have discretion over whether and when to charge Eligible Borrowers this fee.
- An Eligible Borrower may refinance existing debt owed to another lender at the time the MSPLF Loan is originated.
- Find further information here.
Main Street Priority Loan Facility (MSPLF)