The US Federal Reserve launched the Main Street Lending Program with the goal of making credit available to small and mid-sized businesses which were in good financial condition before the COVID-19 pandemic, but now need financing to help maintain their activities until they’ve recovered from the impacts of the pandemic.
Additionally, the Federal Reserve and U.S. Department of the Treasury are rolling out another two installations developed to encourage lending to non-profit organization the Nonprofit Organization New Loan Facility and a nonprofit organization expanded credit Facility. Term sheets for every facility and often asked questions supplying information about eligibility and terms are available below.
How the program works. Interested businesses will work with a qualified lender to decide whether they meet the program prerequisites, and also the lender’s own underwriting standards. The lender will determine if a business is approved for financing. The Fed will take part in the financing by buying a 95 percent interest in the loan. The lender keeps 5 percent of the loan.
The program will operate in three facilities and borrowers can participate in only one of the three facilities described below:
- Main Street New Loan Facility (MSNLF). Loan size from $250,000, and the maximum is the lesser of $35 million, or 4x maximum combined debt to adjusted 2019 EBITDA.
- Main Street Priority Loan Facility (MSPLF). Loan size from $250,000, and the maximum is the lesser of $50 million, or 6x maximum combined debt to adjusted 2019 EBITDA.
- Main Street Expanded Loan Facility (MSELF). Loan size from $10 million and the maximum is the lesser of $300 million, or 6x maximum combined debt to adjusted 2019 EBITDA.
Eligibility The Fed will participate in the lending by purchasing a 95% interest in the loan, and the lender retains 5% of the loan. U.S. Businesses could be eligible for loans if they match both of the following conditions: the company has 15, 000 employees or fewer, or the company had 2019 earnings of $5 billion or less.
Loans issued under the Program could have deferral of principal payment for two decades a five year maturity, and deferral of interest payments for one year. Lenders can originate new loans or increase the size of existing loans made to eligible businesses.
- 5-year maturity
- No amortization until 3rd anniversary
- No interest payments during Year 1
- LIBOR + 3%
- 95% participation by the Fed’s Main Street SPV in each loan
- Meets at least one of the following two conditions: (i) has 15,000 employees or fewer, or (ii) had 2019 annual revenues of $5 billion or less.
How to apply to MSLP? Registration instructions and the form loan participation agreement, form borrower and lender certifications and covenants, along with other essential form arrangements are available on the Federal Reserve Bank of Boston’s Main Street Lending Program Forms and Agreements website.
Small and medium-sized businesses interested in the Loan Program may apply by contacting a qualified lender. An eligible borrower must apply for a Main Street Loan by submitting an application and other required documentation to a lender participating in the MSLP. The lender then will evaluate the borrower’s application based on the MSLP’s eligibility criteria and the lender’s own underwriting criteria.
The lender will ultimately determine whether an eligible borrower is approved for a Main Street Loan.
For additional resources visit bostonfed.org/mslp where you’ll find frequently asked questions, term sheets, and other useful documentation.
Shall you need any assistance with the application process reach out to us.