Main Street Lending Program – What You Need to Know Now

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Jul 01, 2020

By Robin Jackson Miller, EA Partner at Terry Lockridge & Dunn

Robin Jackson Miller.jpgThe Federal Reserve of Boston and the US Treasury have established a series of Main Street Program loans to assist businesses with cash flow during the pandemic. These are very different from the Paycheck Protection Program (PPP) loans. The SBA is not involved with the Main Street lending program. Also, unlike the PPP loans, the borrower’s financial condition will be factored in. Currently, interested lenders are registering to become eligible lenders for the Main Street lending programs. Once the program is operational, small and medium-sized businesses can apply for a loan by contacting an eligible lender.

The Main Street New Loan Facility (MSNLF) is available to eligible borrowers with a business that was established prior to March 13, 2020, is not an ineligible business (non-profits are not eligible for a MSNLF), has either 15,000 employees or less, or 2019 annual revenues of $5 billion or less. The business must be created in and significantly based in the US and not participate in any of the other Main Street Lending programs. Even if you received PPP money, you may still apply for a MSNLF loan.

The minimum loan size has been reduced to $250,000. The maximum loan size is dependent upon your other business debt/available lines of credit and your 2019 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), but cannot be more than $35 million. It cannot be subordinated to any other business debt, but the loan can be prepaid without penalty.

The MSNLF has a five-year maturity with principal payments deferred for two years and interest payments deferred for one year (unpaid interest will be capitalized). The principal will be paid back 15% at the end of the third year, 15% at the end of the fourth year and a balloon payment of 70% at the end of the fifth year. The loan will have an adjustable interest rate of LIBOR (1 or 3 month) plus 300 basis points. You may also be required to pay loan fees to obtain the funds.

There are restrictive covenants as well. The borrower may not prepay any other business debt and cannot seek to cancel or reduce any of its committed lines of credit. S Corps or other tax pass-through entities may make distributions to the extent reasonably required to cover its owners’ tax obligations in respect of the business earnings, but otherwise must follow compensation, stock repurchase and capital distribution restrictions that apply to direct loan programs under section 4003 (c)(3)(A)(ii) of the CARES Act. Also, the borrower needs to make reasonable efforts to maintain its payroll and retain its employees during the time the loan is outstanding.

The other two Main Street Lending Programs are the Main Street Priority Loan Facility and the Main Street Expanded Loan Facility. Main Street programs are currently under development for non-profit entities. The Main Street Priority Loan Facility has a higher borrowing limit of up to $50 million, but still limited by a calculation of 2019 EBITDA and existing debt facilities. The Main Street Expanded Loan Facility has similar eligibility requirements as the other Main Street Lending Programs; however, this loan features upsizing a bank loan that was originated on or before April 24, 2020.

Please be mindful that the terms of the Main Street Lending Programs may change again in the future. If you are interested in our assistance to determine whether one of these is right for your business, please reach out to Robin at or any of the accountants at Terry Lockridge & Dunn. They may be reached in Cedar Rapids at 319-364-2945 or in Iowa City at 319-339-4884.

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