On June 8, 2020, in anticipation of the Main Street Lending Program (MSLP) launch, The Federal Reserve (the Fed) issued revised terms which grant greater accessibility to loans for eligible small- and mid-sized businesses, which were excluded or limited under the prior terms. One week later, the Main Street Lending Program has officially launched and bank lenders are encouraged to begin registering, accepting loan applications, and distributing loans to qualified borrowers.

Double Exposure of business owner receiving loan from lender of the Main Street Lending Program

In order for businesses to receive a Main Street loan, the business, including its affiliates, must have been in sound financial standing prior to the coronavirus outbreak, have up to 15,000 employees on staff, and no more than $5 billion in revenue. Businesses seeking an MSLP loan must submit both primary and ancillary application forms, complete with associated agreements and borrower certification paperwork, to an approved, registered lender for consideration.

Though the $600 billion Main Street Lending Program was announced back in April 2020, both the bank lender registration and borrower loan application processes had not been implemented as the Fed took time to accept input from lenders, borrowers, and other stakeholders, in order to further refine the eligibility requirements and loan terms for new, priority, and expanded loans, as defined by the Fed.

The Main Street Lending Program revised terms include:

  • A reduction to the minimum loan amount for certain loans from $500,000 to $250,000;
  • An increase in the maximum loan amount from $25 million to $35 million for new loans; from $35 million to $50 million for priority loans; and from $200 million to $300 million for expanded loans;
  • An adjustment in loan term length from four to five years for all types of loans;
  • An extension of the repayment deferral period for principal payments for all loan types from one year to two years; and
  • An increase in the Federal Reserve’s participation to 95% for all loans issued.

Both the original terms and the revised terms are clearly delineated in this chart, recently issued by The Fed:

Main Street Lending Program Loan Options New Loans Priority Loans Expanded Loans*
Term 5 years

(previously 4 years)

5 years

(previously 4 years)

5 years

(previously 4 years)

Minimum Loan Size $250,000

(previously $500,000)

$250,000

(previously $500,000)

$10,000,000
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 EBITDA
(previously $25M)
The lesser of $50M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA
(previously $25M)
The lesser of $300M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA
(previously $200M)
Risk Retention 5% 5%

(previously 15%)

5%
Principal Payment Principal deferred for two years, years 3-5: 15%, 15%, 70%

(previously principal deferred for one year and 33.33% repayment due in years 2-4)

Principal deferred for two years, years 3-5: 15%, 15%, 70%

(previously principal deferred for one year and 15%, 15%, 70% repayment due in years 2, 3, and 4, respectively)

Principal deferred for two years, years 3-5: 15%, 15%, 70%

(previously principal deferred for one year and 15%, 15%, 70% repayment due in years 2, 3, and 4, respectively)

Interest Payments Deferred for one year Deferred for one year Deferred for one year
Rate LIBOR + 3% LIBOR + 3% LIBOR + 3%

The announcement that qualified banks wishing to register as Main Street Lending Program lenders is now officially open with revised terms that are more advantageous to small- and mid-sized businesses offers much-needed relief to those businesses that did not qualify for the already operational small business Payment Protection Plan loan program.

If you have questions about the Main Street Lending Program and how changes affect you as a lender or a loan recipient, contact your Untracht Early advisor for more information.