The COVID-19 pandemic has caused widespread economic chaos, no more so, perhaps, than for small and medium-sized for-profit businesses and nonprofit organizations. With that demographic in mind, the Federal Reserve announced the Main Street Lending Program back in April, and the highly anticipated loan program is finally underway.
Five-year loans ranging from $250,000 to $300 million — structured with floating rates — are available from banks that have registered as Main Street lenders. Eligibility includes falling on hard times due to the pandemic, but being in “sound financial condition” before its onset. The Fed has not specified what exact metrics must be met by loan applicants.
Unlike the Paycheck Protection Program, these loans are not forgivable and don’t have requirements such as rehiring employees. Instead, the Fed expects borrowers to make “commercially reasonable efforts to retain employees” given the economic environment. Payments will be deferred at first, with no principal due for two years and no interest for one year.
What else should you know about the program?
- The Treasury Department will make a $75 billion equity investment in a Special Purpose Vehicle (Main Street SPV) in connection with the program. Those funds were appropriated to the Exchange Stabilization Fund as part of the CARES Act.
- At this time, the program is authorized to purchase loan participations until December 31, 2020.
There are three Main Street facilities for for-profit businesses and two for nonprofit organizations. Each has varying requirements and terms.
- Eligible borrowers must meet at the least one of these two conditions: 15,000 or fewer employees or 2019 revenues of no more than $5 billion.
- Nonprofit organizations are included in the program because they are critical parts of the economy—employing millions of people, providing essential services to communities, and supporting innovation and the development of a highly skilled workforce.
Like all loan programs, this one has a lot of moving parts. If you have questions about the Main Street Lending Program, please contact Clear Skies Capital at 800-230-9822 or email us and someone from our Client Services team will promptly respond.