Main Street Lending Program
As part of the CARES Act, the Federal Reserve has created the Main Street Lending Program to provide a total of $600 billion in financing for small and medium-sized businesses. The Federal Reserve established the program to support lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic.
What is it?
The Main Street Lending Program is a new offering created by the Federal Reserve to help businesses during the ongoing COVID-19 crisis and accompanying economic downturn. It is an alternative to the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program. The Federal Reserve designed the program to support businesses that were unable to access the PPP or EIDL programs, however you may qualify for all three.
Unlike many of the other coronavirus relief efforts for small businesses, these programs are not connected to the U.S. SBA.
How does it work?
Interested businesses will work with an eligible lender to determine if they meet the program requirements, which are available online, as well as the lender’s own underwriting standards. The lender will determine whether a business is approved for a loan. The Fed will participate in the lending by purchasing a 95% interest in the loan. The lender retains 5% of the loan.
The Main Street Lending Program will be administered through a single special purpose vehicle (SPV). However, the program actually consists of three separate parts: the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF). Businesses can only participate in one of these.
Am I eligible?
To be eligible, a business must:
- have been established prior to March 13, 2020;
- not be an ineligible business according to Small Business Administration (SBA) regulations;
- have no more than 15,000 employees or 2019 annual revenues of no more than $5 billion;
- have been created or organized in the U.S. with significant operations in and a majority of its employees based in the U.S.;
- only participate in one of the Main Street facilities (MSNFL, MSPLF, or MSELF) and must not also participate in the PMCCF. [Note: Businesses that received support through the SBA Paycheck Protection Program (PPP) are eligible to receive a Main Street loan];
- not have received specific support pursuant to the CARES Act (Subtitle A of Title IV for air carriers, air cargo, and businesses critical to national security);
- be able to make all of the certifications and covenants required under the program; and
- meet all of the above criteria.
How much can I borrow?
The Main Street Lending Program offers three different loan options:
- Main Street New Loan Facility (MSNLF)
- Main Street Priority Loan Facility (MSPLF)
- Main Street Expanded Loan Facility (MSELF)
What these loans have in common are the same maturity, interest rate, deferral of principal and interest for one year, and ability for borrowers to prepay without penalty. How they differ is how they interact with existing debt, origination fees and the level of guarantee by the federal government.
For details, review the comparison chart below:
|New Loan Facility||Priority Loan Facility||Expanded Loan Facility|
|Loan Term||5 years|
|Principal Payments||Principal deferred for two years. Years 3-5: 15%, 15%, 70%|
|Interest Payments||Deferred for one year|
|Interest Rate||Adjustable-rate of LIBOR (1 or 3 mo.) plus 300 basis points|
|Loan Size||$250,000 to $35 million||$250,000 to $50 million||$10 million to $300 million|
|Maximum Combined Debt to Adjusted 2019 EBITDA||4 times||6 times||6 times|
|Lender Participation Rate||5%|
|Fed Participation Rate||95%|
|Prepayment Allowed||Yes, without penalty|
|Business Size Limits||15,000 employees or fewer, or 2019 revenues of $5 billion or less|
|Fees||Origination and transaction fees may apply|
How do I apply?
Like with many other programs designed to help businesses impacted by the COVID-19 crisis, eligible borrowers must submit an application and required documentation to their lender. Borrowers should contact lenders for more information on whether the lender plans to participate in the program and for more information on the application process.
If you are interested in participating in this program, contact your local lender. Eligible lenders include U.S.-insured depository institutions, U.S. bank holding companies and U.S. savings and loan holding companies.
For more information, please read the Federal Reserve’s program details and FAQs.
As always, the Florida SBDC Network is here to help your small business recover. For questions about the loan program and for loan application assistance, contact the Florida SBDC Network office nearest you.