This article was updated on June 9, 2020. Further updates will be made as new information becomes available.
Schneider Downs continues to track the evolving landscape of federal financial programs offered in the wake of the business disruption caused by the COVID-19 pandemic. On June 8, the Federal Reserve announced that it would expand the Main Street Lending Program (Main Street) to allow more small and medium-sized businesses to be able to receive support.
Here are the changes:
- Lowering the minimum size for certain loans from $500,000 to $250,000.
- Increasing the maximum loan size for all facilities.
- Increasing the term of each loan option from four years to five.
- Extending the repayment period for all loans by delaying principal payments for two years, rather than one.
- Raising the Reserve Bank’s participation to 95% for all loans.
The three loan options with updated terms are summarized below:
|
|
New Loans |
Priority Loans |
Expanded Loans |
|
Term |
Five years (previously four) |
Five years (previously four) |
Five years |
|
Minimum Loan Size |
$250,000 (previously $500,000) |
$250,000 (previously $500,000) |
$10,000,000 |
|
Maximum Loan Size |
Lesser of $35M or 4x 2019 adjusted EBITDA (previously $25M) |
Lesser of $50M or 6x 2019 adjusted EBITDA (previously $25M) |
Lesser of $300M or 6x 2019 adjusted EBITDA (previously $200M) |
|
Risk Retention |
5% |
5% (previously 15%) |
5% |
|
Principal Payment |
Deferred two years, years 3-5: 15%, 15%, 70% (previously years 2-4: 33.33% each year) |
Deferred two years, years 3-5: 15%, 15%, 70% (previously years 2-4: 15%, 15%, 70%) |
Deferred two years, years 3-5: 15%, 15%, 70% (previously years 2-4: 15%, 15%, 70%) |
|
Interest Payments |
Deferred one year |
Deferred one year |
Deferred one year |
|
Rate |
LIBOR + 3% |
LIBOR + 3% |
LIBOR + 3% |
The Federal Reserve states it continues to recognize the critical role played by nonprofit organizations throughout the economy and is working to establish a program for these organizations.
A start date for Main Street will be announced soon.
For more information, see our articles regarding Main Street Frequently Asked Questions:
/our-thoughts-on/main-street-lending-program-faqs-part-1
/our-thoughts-on/main-street-faqs-part-2
If you have other questions regarding Main Street, first reach out to your bank and other lenders to see if you can apply for Main Street funding through them. If you need more information, please reach out to any of your connections at Schneider Downs or contact Joel Rosenthal at [email protected].
