Expansion of Main Street Lending Program

This article was updated on May 1, 2020.  Updates to this article will be made as new information becomes available.

Schneider Downs continues to track the evolving landscape of Federal financial programs offered due to the disruption of the coronavirus (COVID-19).  On April 30, 2020, the Federal Reserve, as part of its efforts to support the economy and small and medium-sized businesses, announced that it was increasing the scope and eligibility for the Main Street Lending Program (Main Street).

After public input, the Federal Reserve made the following changes to Main Street:

  • A third Main Street loan option (Priority Loans) was added, with increased risk sharing by lenders for borrowers with greater leverage.
  • The minimum loan size for New and Priority Loans was decreased from $1,000,000 to $500,000.
  • The pool of businesses eligible to borrow was expanded.  Businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible for Main Street.

There are now three loan options: new, priority and expanded, as detailed below:

  New Loans Priority Loans Expanded Loans
Term 4 years 4 years 4 years
Minimum Loan Size $500,000 $500,000 $10,000,000
Maximum Loan Size Lesser of $25M or 4x 2019 adjusted EBITDA Lesser of $25M or 6x 2019 adjusted EBITDA Lesser of $200M, 35% of outstanding and undrawn available debt, or 6x 2019 adjusted EBITDA
Risk Retention 5% 15% 5%
Payment (year one deferred for all) Years 2-4: 33.33% each year Years 2-4: 15%, 15%, 70% Years 2-4: 15%, 15%, 70%
Rate LIBOR + 3% LIBOR + 3% LIBOR + 3%

The Federal Reserve stated it “recognizes the critical role that nonprofit organizations play throughout the economy and is evaluating a separate approach to meet their unique needs.”  It also stated that it will be evaluating the feasibility of adjusting the loan eligibility metrics for asset-based borrowers.

A start date for Main Street will be announced soon.

The Federal Reserve has addressed Frequently Asked Questions about the Main Street Lending Program.

If you have other questions regarding the Main Street program, first reach out to your bank and other lenders about whether you can apply for Main Street funding through these institutions.  If you need more information, please reach out to any of your contacts at Schneider Downs or contact Joel Rosenthal ([email protected]).

Please visit our Coronavirus Resource Center for related content.

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