Federal Reserve Adds Details on Main Street Loan Program


On April 9, 2020, the Federal Reserve System (Federal Reserve) announcement further details on its plan to provide $ 2.3 trillion in loans to support the economy in light of the consequences of the crisis new coronavirus 2019 (COVID-19), including loans through its Main Street loan program. The Main Street Loan Program will bring relief to a wider range of businesses than the Coronavirus, Aid, Relief and Economic Security Act (CARES Act) by not only focusing on small businesses, but also on medium-sized companies. The Federal Reserve is seeking comments on this program until April 16, 2020 and, therefore, conditions are subject to change. Specific timing information and other details about the application processes have not yet been released.

Through two facilities, the Main Street Lending Program makes $ 600 billion available to businesses employing up to 10,000 workers or having up to $ 2.5 billion in annual revenues in 2019. The new lending facility of Main Street (MSNLF) will provide newly issued loans to eligible businesses, while a second facility, the Main Street Extended Loan Facility (MSELF), will allow businesses to increase existing loans. In particular, unlike loans under the Small Business Administration (SBA) Paycheck Protection Program (PPP), loans made under the Main Street Loan Program will not be eligible for full or partial forgiveness.

Businesses will apply for loans under the Main Street loan programs through insured depository institutions in the United States, US bank holding companies and US savings and credit holding companies. Lenders will keep a five percent share of the loans, with the remaining 95 percent sold to a Federal Reserve special purpose vehicle. The Federal Reserve press release states that eligible borrowers must have been “in good financial condition before the crisis”, although specific details regarding this requirement have not yet been released.


Loans under the facility should reflect the following characteristics:

  • Term: Four-year maturity

  • Adjournment period: One-year deferred principal and interest payments

  • Rate: Revisable SOFR rate + 250-400 basis points

  • Prepayment: Authorized without penalty


The maximum loan amount is different for each establishment:



Minimum: $ 1 million

Maximum: The lesser of:

  1. $ 25 million

  2. An amount which, added to the borrower’s outstanding and committed existing debt but not used, does not exceed four times the borrower’s 2019 EBITDA

Minimum: $ 1 million

Maximum: The lesser of:

  1. $ 150 million

  2. Thirty percent of the borrower’s outstanding and committed existing bank debt, but not used

  3. An amount which, added to the borrower’s outstanding and committed existing bank debt, but not used, does not exceed six times the borrower’s 2019 EBITDA


Both loan facilities are based on funds allocated to the Exchange Stabilization Fund through the CARES Act, so loans are subject to the conditions detailed in the CARES Act, as well as certain certification requirements, each described below:

  1. Borrowers must adhere to the compensation, share buyback and dividend restrictions that apply to direct loan programs under the CARES Act

  2. Borrowers must certify, in part, that:

    1. Proceeds will not be used to repay other loan balances

    2. The borrower will refrain from repaying other debts of equal or lower priority with the exception of mandatory repayments of the principal

    3. The borrower will not seek to cancel or reduce existing lines of credit

    4. Borrower needs financing due to emergency circumstances presented by COVID-19

    5. The borrower “will make reasonable efforts to maintain its payroll and retain its employees” during the term of the loan


Participation in the Main Street Lending Program does not prevent companies from participating in the SBA PPP. However, businesses cannot participate in the two facilities of the Main Street Loan Program and cannot participate in the Main Street Loan Program. Federal Reserve Primary Market Credit Facility.


Loans under the Main Street Loan Program are subject to the following fees:

  1. Facility commission: for new loans made under the MSNLF, the lender is required to pay a facility commission of 100 basis points corresponding to 95% of the principal amount, which the lender can pass on to the borrower

  2. Origination fee: for new and revalued loans, the borrower is required to pay an origination fee of 100 basis points of the principal amount of the new loan or the revalued tranche

  3. Service charge: For servicing the loan, the Federal Reserve will pay the lender 25 basis points of the principal amount of the lender’s participation per year


New loans under the MSNLF will not be guaranteed. Existing guarantees on the increased loans under the MSELF will guarantee the increased loan on a pro rata basis.


Federal Reserve programs can provide an avenue of funding for private equity holding companies limited by SBA membership rules applicable to PPP loans. Eligibility for Federal Reserve programs is extended to companies employing up to 10,000 workers, and there is no indication that the SBA’s membership rules will apply.


Businesses interested in taking advantage of the Main Street Loan Program should consider taking the following steps now:

Evaluate options through existing lender relationships

Depending on your relationship with your current lender (s), increasing an existing loan may be the fastest way to improve your cash flow situation due to the relationship established. While the maximum loan amount will depend on a number of factors, including your current debt level, the preliminary term sheets indicate that you may be eligible for a larger total loan amount by increasing an existing loan. .

Contact your lender

If you haven’t already, contact your lender now to discuss your business’s financial situation, potential financing needs, existing debt structure, and which Federal Reserve program might best suit. to the specific needs of your business. Review with your lender and advisors the terms of your existing credit facilities for any commitments that may restrict your participation, including limitations on incurring additional debt.


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