Breaking Down the
Main Street Lending Program
The Federal Reserve announced the creation of new lending facilities under The Main Street Lending Program (MSLP) to assist small and mid-size businesses with capital needs in light of COVID-19. An organization having already taken advantage of a Paycheck Protection Program (PPP) loan may also take out MSLP loans. MSLP loans will be offered by the Fed through eligible lenders, U.S. insured depository institutions, U.S. bank holding companies, and U.S. savings and loan holding companies.
Eligible businesses for the two MSLP facilities include:
- Organizations with up to 10,000 employees or up to $2.5 billion in 2019 annual revenues; and
- Organization must be created or organized in the U.S. or under the laws of the U.S. with significant operations in the U.S. and a majority of its employees based in the U.S.
The two MSLP facilities are: Main Street New Loan Facility (MSNLF) and Main Street Expanded Loan Facility (MSELF). A company cannot participate in both MSNLF and MSELF. Companies that participate in the MSLP cannot participate in the Primary Market Corporate Credit Facility.
Main Street New Loan Facility - MSNLF
MSNLF are for new loans made on or after April 8, 2020 with a maximum loan size of the lesser of:
- $25 million, or
- An amount that, when added to the borrower’s existing outstanding and committed but undrawn debt, does not exceed four times that borrower’s 2019 earnings before interest expense, income taxes, depreciation and amortization (EBITDA).
Main Street Expanded Loan Facility - MSELF
MSELF allows banks to increase the size of an outstanding loan issued prior to April 8, 2020, to a business customer, rather than initiating a new loan. The maximum loan size is the lesser of:
- $150 million, or
- 30% of the borrower’s existing outstanding and committed but undrawn bank debt, or
- An amount that, when added to the borrower’s existing outstanding and committed but undrawn debt, does not exceed six times that borrower’s 2019 EBITDA.
Loan Terms and Attestations
A MSLP facility has a 4 year maturity and an adjustable interest rate based on the secured overnight financing rate (SOFR) plus 250 to 400 basis points. Amortization of principal and interest is deferred for one year. Borrowers will not incur prepayment penalties for retiring the debt before it matures. The minimum loan amount is $1 million. It is expected that the MSLP facilities will be secured by collateral.
The Federal Reserve has announced that firms seeking MSLP loans must commit to make reasonable efforts to maintain payroll and retain workers. Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act. Additional borrower attestations are enumerated in the term sheets published by the Fed for this program.
The Federal Reserve Term Sheets (effective April 9, 2020) for MSNLF and MSELF can be accessed through the following links: