Main Street Lending Programs – Mark Gardiner, Partner, CPA, CFE

Small business Tax

On April 9th, the Federal Reserve launched a $600 billion lending program to help small and medium sized businesses deal with the economic crisis due to the COVID-19 pandemic.   There are two types of loan programs under the Main Street Lending Program.  They are the Main Street New Loan Facility and the Main Street Expanded Loan Facility.   Eligible borrowers for the Main Street Lending Programs are businesses that meet the following criteria:

  • Have up to 10,000 employees or $2.5 billion in annual revenues
  • Must be a business created or organized in the United States

Like many other programs designed to help businesses impacted by the COVID-19 crisis, the loans businesses get through the Main Street Lending Program originate at the local banks.  The Federal Reserve will be buying up to $600 billion worth of loans from local banks to allow the banks more flexibility on who they offer loans to. 

The Main Street New Loan Facility is for new loans that originate on or after April 8, 2020.  The maximum loan size is the lessor of $25 million or an amount that when added to the borrower’s existing outstanding and committed but undrawn debt, does not exceed four times that borrower’s 2019 EBITDA.

The Main Street Expanded Loan Facility allows banks to increase the size of an outstanding loan issued prior to April 8, 2020 to a business customer, rather than initiate a new loan.  The maximum loan size is the lessor of $150 million, 30% of the borrower’s existing outstanding and committed but undrawn bank debt, or an amount that, when added to the borrower’s existing outstanding and committed but undrawn debt, does not exceed six times that borrower’s 2019 EBITDA. 

Loan terms have a four-year maturity with a variable interest rate.  Principal and interest payments under this new program will be deferred for one year. There are some covenants to these loans, which include make reasonable efforts to maintain its payroll and employees and the proceeds from these loans will not be used to repay or refinance pre-existing loans.  Companies that have taken advantage of the Paycheck Protection Program are also eligible for loans through the Main Street Lending Program.

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