What to Know About Main Street Lending Program Updates

June 11, 2020 | Article

The Federal Reserve announced revisions to the Main Street Lending Program designed to make financial support available to more small and mid-size businesses to help maintain operations and payroll.

What is the Main Street Lending Program?
The Main Street Lending Program is a relief program designed to support lending to small and mid-sized businesses impacted by COVID-19. Businesses are generally eligible for loans under the program if they have 15,000 or fewer employees or had 2019 revenues of $5 billion or less.

The most recent changes made by the Federal Reserve include:

  • The minimum loan size for certain loans was lowered to $250,000 from $500,000.
  • The loan term increased from four to five years.
  • Principal payments are delayed for two years (rather than the initial deferral period of one year).
  • The maximum loan sizes (which vary depending upon the loan facility used) have been increased.
  • The Federal Reserve’s participation is now 95% for all loan facilities (lenders retain 5% of the risk).

We broke down how the various relief provisions compare.

Main Street Lending Program loans are made through eligible lenders – generally banks, savings associations and credit unions that register for the program. Loans from Main Street Lending Program remain full-recourse loans, with no forgiveness provisions as there are with the Paycheck Protection Program (PPP). Businesses that obtained a PPP loan are eligible to receive a loan under the program. Borrowers will be subject to restrictions on compensation, stock repurchases and capital distributions except that pass-through businesses (like S corporations and partnerships) will be allowed to make capital distributions reasonably needed to cover owners’ tax obligations related to business earnings.

When Does the Main Street Lending Program Open?
Once the program opens for lender registration, which the Federal Reserve expects to happen “soon,” lenders will be able to start making loans. The Main Street Lending Program will be administered through three facilities.

The same criteria will be used by all three facilities to determine eligible lenders and eligible borrowers, as well as having the same maturity, interest rate, deferral of principal and interest, and ability of the borrower to prepay the loan without penalty.

The three lending facilities are:

The program will be available through September 30, 2020, unless it is extended. The combined size of the three loan facilities will be up to $600 billion. More details are covered in Frequently Asked Questions posted at the Federal Reserve’s Main Street Lending Program website.

Learn more about the program’s three lending facilities below:

Main Street Lending Program Loan Options

Understand the Impact of the Main Street Lending Program
The Main Street Lending Program is another form of relief specifically designed for small to mid-sized businesses. It is also compatible with other pieces of relief legislation that are in play.

The Federal Reserve appears close to launching the Main Street Lending Program, and lenders should be able to start processing loan applications soon.

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