The Federal Reserve Board (the Board) announced changes to the Main Street Lending Program on June 8th that are designed to expand the program to more small and medium-sized businesses. The Main Street Lending Program was established and funded with the passing of the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. The CARES Act was signed into law by President Trump on March 27th, 2020.
The changes were listed on a press release that the Federal Reserve’s MSLP homepage that tracks program updates and changes. The Board indicated the changes are a result of feedback received since the initial announcement of the lending program.
The changes include:
- Lowering the minimum loan size for certain loans to $250,000 from $500,000;
- Increasing the maximum loan size for all facilities;
- Increasing the term of each loan option to five years, from four years;
- Extending the repayment period for all loans by delaying principal payments for two years, rather than one; and
- Raising the Reserve Bank’s participation to 95% for all loans.
The Board also indicated that it is working to establish a program for nonprofit organizations.
A summary of the terms, conditions and details of the 3 loan facilities is summarized in the below chart:
| Main Street Lending Program Loan Options | New Loans | Priority Loans | Expanded Loans |
| Minimum Loan Size | $250,000 (previously $500,000) | $10M | |
| Maximum Loan Size | The lesser of $35M, or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted EBITDA (previously $25M) | The lesser of $50M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA (previously $25M) | The lesser of $300M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA (previously $200M) |
| Risk Retention | 5% | 5% (previously 15%) | 5% |
| Principal Repayment | Principal deferred for two years, years 3-5: 15%, 15%, 70% (previously principal deferred for one year and 33.33% repayment due in years 2-4) | Principal deferred for two years, years 3-5: 15%, 15%, 70% (previously principal deferred for one year and 15%, 15%, 70% repayment due in years 2, 3, and 4, respectively) | |
| Interest Payments | Deferred for one year | ||
| Rate | LIBOR + 3% | ||
Source: Federal Reserve
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Brinker Simpson & Company, LLC
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