The Federal Reserve recently released additional guidance and an FAQ regarding the $600 billion Main Street Lending Program (the “Main Street Program”) to provide support to small and medium-sized businesses that were in sound financial condition prior to the onset of the COVID-19 pandemic to maintain their operations and payroll until conditions normalize. Subject to the term sheet of each loan facility, U.S. businesses with 15,000 employees or fewer or 2019 annual revenues of $5 billion or less may participate in the Main Street Program.
Main Street Program includes three loan facilities, each of which was authorized by the Federal Reserve Board under section 13(3) of the Federal Reserve Act. The amount that a business will be permitted to borrow under the Main Street Program will range from a minimum of $500,000 to a maximum of an amount equal the lesser of the following amounts, based on the particular loan facility:
Main Street New Loan Facility (MSNLF): (i) $25 million, or (ii) an amount that, when added to the borrower’s existing outstanding and undrawn debt, does not exceed 4 times the borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”);
Main Street Priority Loan Facility (MSPLF): (i) $25 million, or (ii) an amount that, when added to the borrower’s existing outstanding and undrawn debt, does not exceed 6 times the borrower’s 2019 EBITDA; and
Main Street Expanded Loan Facility (MSELF): (i) $200 million, or (ii) 35% of the borrower’s existing outstanding and undrawn debt that is pari passu in priority with the eligible loan and equivalent in secured status (i.e., secured or unsecured); or (iii) an amount that, when added to the borrower’s existing outstanding and undrawn debt, does not exceed 6 times the borrower’s 2019 EBITDA.
Loans issued under the Main Street Program would have a four-year maturity, and principal and interest payments on the loans will be deferred for one year. All Program loan facilities are non-forgivable.
The Main Street Program will remain open until September 30, 2020, unless the Program is extended by the Federal Reserve Board and the Treasury Department.
The Main Street Program is not yet operational and the Federal Reserve is currently working to create the infrastructure necessary to operationalize the program.