The Main Street Lending Program (MSLP) is a new lending program being offered by the Federal Reserve (The Fed) to provide relief for businesses during the COVID-19 pandemic and accompanying economic downturn. Unlike the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) funds, these programs are not administered by the Small Business Administration (SBA). Instead, they are run by The Fed. The MSLP activates portions of the CARES Act that allow for the establishment of emergency loan programs for midsize businesses that may not have received enough relief under previous efforts. Additionally, it establishes new loan facilities for small and midsized-businesses with up to 10,000 employees or with revenues less than $2.5 billion.
There are some important takeaways regarding the structure of the Main Street Lending Program in its current form:
- It does not specify a minimum number of employees for borrowers.
- The 500-employee restriction in the CARES Act for the midsize lending facility has been omitted.
- The announcement expressly states that companies that borrow from the SBA’s PPP are also eligible to participate in the MSLP.
Eligible borrowers under both the Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF) include:
- Any business organization (profit or nonprofit) with either a maximum number of 10,000 employees; or
- A maximum amount of $2.5 billion in annual revenues.
This is regardless of the total number of employees as long as the company meets all the following conditions:
- It is a business created or organized in the United States or under the laws of the United States that has significant operations in and a majority of employees in the United States;
- It was in good financial standing before the crisis;
- The previous loans or loan guarantees under the CARES Act did not adequately supply relief;
- It is not a participant in the Federal Reserve’s Primary Market Corporate Credit Facility.
The Federal Reserve’s term sheets for this program do not provide information regarding either the application process for new loans or expanded loans under the MSLP. We are also waiting for clarity regarding the procedures for lenders to sell loan participations to the Main Street special-purpose vehicle (SPV). In a presentation about the program, analysts announced that additional details regarding both a borrower’s application for credit under the program and the mechanics of a lender’s sale of loans to the MSNLF or the MSELF will come after April 16th. That date is intentional because it is the close of the comment period stated in the Federal Reserve’s announcement about the new funds.
What does this mean for your organization
We shouldn’t expect that applications for new or expanded loans can be accepted by lenders under the MSL until the week of April 20th –24th. In the meantime, the best guidance regarding the application process is to call your lender. This will help your organization get a good sense of the required documents for the application process and what funds your organization is eligible to receive.