Fed's Main Street Lending Program Expanded
June 9, 2020
By: Robert A. Greising and Corben A. Lee
On June 8, 2020, the Federal Reserve Board (the “Fed”) issued a press release indicating that it will expand the terms of the Main Street Lending Program to allow more small and medium-sized businesses to apply.
The changes to the program include: lowering the minimum loan 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 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 Fed’s participation to 95% for all loans.
The release again acknowledged the critical role that nonprofits play throughout the economy and will be evaluating a separate approach to meet their needs. As we receive further guidance from the Fed, we will provide further updates.
In conjunction with these changes, the Fed announced that it will be updating many of the relevant forms to be used by lenders and borrowers who participate in this program. Links to the term sheets for each of the program’s three facilities – the Main Street New Loan Facility, the Main Street Priority Loan Facility and the Main Street Expanded Loan Facility – were included in the press release (which can be accessed here)
For an overview of the three loan programs please see this table from the Fed’s announcement:
| New Loans | Priority Loans | Expanded Loans | |
| Term | 5 years | ||
| Minimum Loan Size | $250,000 (previously $500,000) | $10,000,000 | |
| Maximum Loan Size | The lesser of $35M or an amount that, when added to outstanding and undrawn available debt, does not exceed 4x adjusted 2019 EBITDA (previously $25M) | The lesser of $50M or an amount that, when added to outstanding and undrawn available debt, does not exceed 6x adjusted 2019 EBITDA (previously $25M) | The lesser of $300M, 35% of existing outstanding and undrawn available debt, or an amount that, when added to outstanding and undrawn available debt, does not exceed 6x adjusted 2019 EBITDA (previously $200M) |
| Risk Retention | 5% | 5% (previously 15%) | 5% |
| Payment | 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%
| ||
If you have any further questions, comments or concerns, please feel free to contact Robert A. Greising, Corben A. Lee or a member of our Business, Acquisitions & Securities team or Commercial and Real Estate Lending team.
Krieg DeVault is committed to helping you and your business during these unprecedented times. With your needs in mind, we have established a COVID-19 Resource Center to assist you through this process.
Practices
June 9, 2020
By: Robert A. Greising and Corben A. Lee
On June 8, 2020, the Federal Reserve Board (the “Fed”) issued a press release indicating that it will expand the terms of the Main Street Lending Program to allow more small and medium-sized businesses to apply.
The changes to the program include: lowering the minimum loan 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 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 Fed’s participation to 95% for all loans.
The release again acknowledged the critical role that nonprofits play throughout the economy and will be evaluating a separate approach to meet their needs. As we receive further guidance from the Fed, we will provide further updates.
In conjunction with these changes, the Fed announced that it will be updating many of the relevant forms to be used by lenders and borrowers who participate in this program. Links to the term sheets for each of the program’s three facilities – the Main Street New Loan Facility, the Main Street Priority Loan Facility and the Main Street Expanded Loan Facility – were included in the press release (which can be accessed here)
For an overview of the three loan programs please see this table from the Fed’s announcement:
| New Loans | Priority Loans | Expanded Loans | |
| Term | 5 years | ||
| Minimum Loan Size | $250,000 (previously $500,000) | $10,000,000 | |
| Maximum Loan Size | The lesser of $35M or an amount that, when added to outstanding and undrawn available debt, does not exceed 4x adjusted 2019 EBITDA (previously $25M) | The lesser of $50M or an amount that, when added to outstanding and undrawn available debt, does not exceed 6x adjusted 2019 EBITDA (previously $25M) | The lesser of $300M, 35% of existing outstanding and undrawn available debt, or an amount that, when added to outstanding and undrawn available debt, does not exceed 6x adjusted 2019 EBITDA (previously $200M) |
| Risk Retention | 5% | 5% (previously 15%) | 5% |
| Payment | 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%
| ||
If you have any further questions, comments or concerns, please feel free to contact Robert A. Greising, Corben A. Lee or a member of our Business, Acquisitions & Securities team or Commercial and Real Estate Lending team.
Krieg DeVault is committed to helping you and your business during these unprecedented times. With your needs in mind, we have established a COVID-19 Resource Center to assist you through this process.