Cam HillingMay 20, 2020 

The Federal Reserve (Fed) expects to launch its Main Street Lending Program by the beginning of June. The news comes after the Fed announced the formation of the program in early April and an expansion of it on April 30, 2020. The program’s goal is to get funds to small and medium-sized businesses, and its expansion allows a wider variety of lenders and borrowers to participate in the program.

The Main Street Lending Program now operates through three facilities: the Main Street New Loan Facility (“MSNLF”), the Main Street Expanded Loan Facility (“MSELF”), and the Main Street Priority Loan Facility (“MSPLF”).

You can apply for any of the Main Street loans by contacting an eligible lender. The eligible lenders are U.S. federally insured depository institutions (including a bank, savings association, or credit union), a U.S. branch or agency of a foreign bank, a U.S. bank holding company, a U.S. savings and loan holding company, a U.S. intermediate holding company of a foreign banking organization, or a U.S. subsidiary of any of the foregoing. After the application, eligible lenders will conduct an assessment of each potential borrower’s financial condition.

A business may only participate in one of the Main Street Facilities: the MSNLF, the MSELF, or the MSPLF. Further, a business is not eligible if it participates in the Primary Market Corporate Credit Facility (“PMCCF”) offered by the Fed. The PMCCF is a separate lending program that provides access to credit for investment-grade companies.

To be eligible to borrow through one of the Main Street Facilities, a business must meet all of the following requirements:

  • Domestic business established prior to March 13, 2020
  • Not an Ineligible Business, as defined by the Small Business Administration, including but not limited to
    • Non-Profits
    • Business primarily engaged in financial and lending services
    • Passive businesses
    • Life Insurance Companies
    • Casinos/Gambling
  • Meet one of the following two conditions: (i) has 15,000 employees or fewer, or (ii) had 2019 annual revenues of $5 billion or less
  • Has not received support under the sections of the CARES Act, which authorized up to $46 billion for direct Treasury support for passenger air carriers (and certain specified related businesses), cargo air carriers, and businesses critical to maintaining national security

Businesses that have received PPP loans are not precluded from eligibility. Below are some of the required features of the Main Street Facilities.

Key Features

  • 4 year maturity
  • Principal and interest payments deferred for one year
  • Adjustable rate of LIBOR (1 or 3 month) + 300 basis points
  • Prepayment without penalty

Specific Facility Features

Main Street New Loan Facility

  • Principal amortization of one-third at the end of the second year, one-third at the end of the third year, and one-third at maturity at the end of the fourth year
  • Minimum loan size of $500,000
  • Maximum loan size that is the lesser of (i) $25 million or (ii) an amount equal to four times the eligible borrower’s 2019 adjusted EBITDA plus the amount of any credit lines (whether drawn or undrawn)
  • At the time of origination, or at any time during the term, a MSNLF loan may not be contractually subordinated in terms of priority to another loan of the borrower

Main Street Expanded Loan Facility

  • Principal amortization of 15% at the end of the second year, 15% at the end of the third year, and a balloon payment of 70% at maturity at the end of the fourth year
  • Minimum loan size of $10 million
  • Maximum loan size that is the lesser of (i) $200 million, (ii) 35% of the eligible borrower’s existing outstanding and undrawn available debt that is equal in priority with the eligible loan and is equal in secured status (i.e., secured or unsecured), or (iii) an amount equal to six times the eligible borrower’s 2019 adjusted EBITDA plus the amount of any credit lines (whether drawn or undrawn).

Main Street Priority Loan Facility

  • Principal amortization of 15% at the end of the second year, 15% at the end of the third year, and a balloon payment of 70% at maturity at the end of the fourth year
  • Minimum loan size of $500,000
  • Maximum loan size that is the lesser of (i) $25 million or (ii) an amount equal to six times the eligible borrower’s 2019 adjusted EBITDA plus the amount of any credit lines (whether drawn or undrawn).
  • At the time of origination and at all times the eligible loan is outstanding, the eligible loan is senior to or equal with, in terms of priority and security, the eligible borrower’s other loans or debt instruments, other than mortgage debt.

For more information on the Main Street Lending Program, including required covenants and certifications, please visit the Federal Reserve’s Main Street Lending Program page here or reach out to a professional at Walter | Haverfield here.

Cameron Hilling in an associate at Walter | Haverfield who focuses his practice on real estate law. He can be reached at chilling@walterhav.com or at 216.658.6217.