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Main Street Lending Program Provides Additional Relief for Small to Medium-Sized Businesses
April 28, 2020


All information in this COVID-19 Response Resource issue is effective as of April 28, 2020.

The Main Street Lending Program is a program described in the Coronavirus Aid Relief and Economic Securities Act (CARES) and was created by the Federal Reserve System (Fed) to support lending to small and medium-sized businesses that were in good standing before the COVID-19 pandemic. The program is not yet operational, but it is expected to be very soon. 

The Program will operate through two facilities: (1) the Main Street New Loan Facility (MSNLF) and (2) the Main Street Expanded Loan Facility (MSELF). Approximately $600 billion will be available under the program. Eligible borrowers are businesses with up to 10,000 employees or up to $2.5 billion in 2019 annual revenues. Generally, the terms of the loans include, without limit: four-year maturity; amortization of principal and interest deferred for one-year; adjustable rate of 2.5 to 4 percent (plus the Secured Overnight Financing Rate, currently 0.1 percent); and minimum size of $1 million with a maximum size of $150 million (dependent on the business). 

Generally, the funds may not be used to repay existing debt, including lines of credit. To receive the loan, the borrower must attest that it requires financing due to COVID-19, and that in using the proceeds, it will make reasonable efforts to maintain its payroll and retain its employees during the term of the eligible loan. The borrower must also follow compensation, stock repurchase and capital distribution restrictions that apply to direct loan programs under section 4003(c)(3)(A)(ii) of the CARES Act. Under the program, there are also restrictions on increasing pay to the highly compensated and severance limitations. Currently, it appears that the application requires documents similar to those required for the Paycheck Protection Program (PPP). Additionally, these loans are originated with local banks. Companies that have already applied to the PPP loan program are also eligible for loans through the Main Street Lending Program. As of now, it does not appear that traditional underwriting requirements will apply to these loans, but because private lenders will be taking on 5 percent of the risk of the loan, we would expect to see some underwriting, and there are no collateral requirements. 

To obtain more information on the Main Street Loan Program, contact Matt Cook by calling (801) 536.6819 or send an email to mcook@parsonsbehle.com or call Emily Holt at (801) 536.6984 or send an email to eholt@parsonsbehle.com.