After receiving 2,200 letters from individuals, businesses, and nonprofits in response to its original release of the Main Street Lending Program (MSLP), the Federal Reserve announced on April 30, 2020 that it will be expanding the scope and eligibility of the program.
To better provide credit to small and medium-sized businesses, the Federal Reserve’s requirements for the MSLP now include businesses with up to 15,000 employees or up to $5 billion in annual revenue
, which is greater than the initial program’s 10,000 employee or $2.5 billion in revenue terms. Additionally, a third loan option, the Priority Loan Facility, will accompanying the New Loan and Expanded Loan facilities that were previously announced. The Priority Loan Facility
will feature increased risk sharing by lenders for borrowers with greater leverage. The minimum loan requirements for the New and Priority Loan Facilities was decreased to $500,000
from $1,000,000, as well. Under all facilities, principal and interest payments will be deferred for one year
. That said, the maximum loan size differs between the New, Priority, and Expanded loans. The features of each facility are summarized below:
Additionally, we note that eligible borrowers under the MSLP cannot repay debt of equal or lower priority until the MSLP loan is repaid in full, so companies should review any restrictions on the incurrence of debt and any restriction on negative pledges. Therefore, eligible borrowers should begin dialogues with their lending institutions regarding any amendments to existing loan agreements that may be necessary.
For specific terms of origination, servicing, and facility fees, please see term sheets for the MSNLF, MSPLF, and MSELF below:
Additionally, the Federal Reserve published Frequently Asked Questions given feedback from its initial release on April 9, 2020 of the Main Street Lending Program’s details. The questions address the following areas: the purpose and design of the program, new/priority loans and upsized tranches, borrower eligibility, the application, terms and conditions, certifications and covenants, lender information, regulatory treatment, and operational details. Of note, the types of eligible organizations are discussed, as well as requirements for compensation, stock repurchase, and capital distributions. For additional details, see the below link:
Main Street Lending Program – Frequently Asked Questions (April 30,2020)(PDF)